Company Boards Discover It Troublesome To Restrict Executives’ Threat-Taking Hobbies : NPR

The danger calculus for corporations whose leaders take part in perilous actions is extra sophisticated in the present day, as company titans Richard Branson and Jeff Bezos have accomplished their travels to area.



A MARTINEZ, HOST:

After a fast journey to the sting of area, Amazon’s founder Jeff Bezos is again on Earth.

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JEFF BEZOS: Management, Bezos – greatest day ever.

UNIDENTIFIED PERSON: Yeah.

MARTINEZ: There have been cheers but in addition sighs of aid from Amazon’s board of administrators. An surprising harm or dying of a high govt like Bezos may throw an organization like Amazon into turmoil. However as NPR’s David Gura stories, there is not a lot they’ll do to rein within the risk-taking.

DAVID GURA, BYLINE: Just a few years earlier than Mark Bertolini grew to become the top of the medical health insurance firm Aetna, he went snowboarding in Vermont.

MARK BERTOLINI: I used to be wanting over my shoulder, checking on one thing, and I caught an edge and hit a tree and slipped headfirst 60 ft down right into a river.

GURA: Bertolini was in a coma. He’d damaged his backbone in 5 locations. And there is been a protracted, troublesome restoration. However the insurance coverage govt didn’t hand over snowboarding. He is additionally somebody who loves bikes. Bertolini owns three Harley Davidsons and a Ducati.

BERTOLINI: After I first was named CEO and chairman and was requested to have a look at a contract, that they had snowboarding and motorcycling in there as exclusions. And I informed them that that would not work for me.

GURA: Throughout these negotiations, Bertolini pushed again. And so they relented.

BERTOLINI: I stated that, you realize, I’d proceed to watch out and take the suitable precautions, however my life was my life, and I wasn’t keen to offer these up.

GURA: Many executives play golf and tennis, however some wish to push the envelope. Going to area is one thing Jeff Bezos has wished to do for years. Bloomberg TV interviewed him after the journey.

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BEZOS: Actually, I am not gifted sufficient to explain this in phrases. I am unable to determine it out. It was rather more than I anticipated. It is awe-inspiring.

GURA: Richard Branson, the founding father of the Virgin Group, has tried to circle the Earth in a scorching air balloon, and a couple of week and a half in the past, he went to area. Here is Branson on CNN.

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RICHARD BRANSON: It was simply, like, essentially the most unbelievable dream. And simply we’re all simply so fortunate, so fortunate, to have the ability to take part in it.

GURA: Firm founders appear to really feel particularly empowered to do what they need to do. On the Fourth of July, Fb’s Mark Zuckerberg posted a video. It is him driving a hydrofoil surfboard, holding an American flag. Hillary Sale is a professor of regulation and administration at Georgetown College, and he or she says risk-taking can result in pressure between a board and executives.

HILLARY SALE: At what level does their obligation to, specifically, a publicly traded firm eclipse their sense of non-public freedom? And at what level does the board want to talk to them about that?

GURA: A board is meant to place an organization’s greatest pursuits first, and when a CEO does one thing harmful, the board is aware of that additionally places in danger buyers and workers who rely on that enterprise for his or her livelihood. In 2012, the CEO of Micron Expertise died piloting a aircraft, and though the corporate named a brand new CEO days later, the inventory did not recuperate for a couple of yr. Boards could make suggestions. They will take out additional insurance coverage and add restrictions to contracts. However enforcement is uneven. Robert Lutz was a high govt at GM, Ford and Chrysler.

ROBERT LUTZ: I’ll inform you, I encountered these restrictions my entire profession, by no means took them very critically and bought away with it for 47 years.

GURA: He additionally favored snowboarding and bikes. And Lutz owned and flew two fighter planes. When GM wished Lutz again for an additional large job in 2001, this got here up, and Lutz remembers what he informed the board.

LUTZ: I am completely satisfied to rejoin the corporate. I am completely satisfied to imagine the submit as vice chairman. However I would like absolute freedom so far as my hobbies are involved.

GURA: Lutz says he bought that absolute freedom. And he flew these jets till he was 87, by the best way. He needed to cease two years in the past when he failed an eye fixed examination. Lutz thinks extra executives needs to be daredevils.

LUTZ: Versus, you realize, calm, peaceable guys who by no means need to put themselves in danger, at all times drive on the pace restrict, drive a minivan as their solely car and so forth – who the heck needs an individual like that to steer a company or be in a management place at a company?

GURA: Lately, Mark Bertolini is retired from Aetna, and he is nonetheless snowboarding and driving bikes. And he additionally believes leaders ought to take extra dangers. However now Bertolini sits on a handful of company boards. He is on the opposite aspect of the desk. And that has given him a greater appreciation for the challenges a board would face with a risk-taking CEO.

BERTOLINI: You by no means need to be in a spot the place that particular person is indispensable to the success of the corporate, nor would you like it, if it is publicly traded, to have a big impact on market cap.

GURA: That is why CEO succession planning is so essential. Bertolini says when he was working Aetna, he had a dialog about it at each board assembly.

David Gura, NPR Information, New York.

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https://www.npr.org/2021/07/21/1018686222/corporate-boards-find-it-difficult-to-limit-executives-risk-taking-hobbies