Sometimes, the CEO must fall on their sword
ON MONDAY, CHANNEL 4 News broadcast hidden camera footage of Cambridge Analytica. The company is a political consulting firm based in London that boasts of being able to provide data and insights to ‘drive your voters to the polls and win your campaign.’.
It says it has played a ‘pivotal role’ in winning US presidential races, including the election of Donald Trump. And in footage broadcast by Channel 4, Cambridge Analytica boss Alexander Nix apparently describes how his firm could discredit political rivals by arranging various smear campaigns, including setting up encounters with Ukrainian prostitutes and creating situations where bribery could be alleged.
Once the footage had been released, the firm denied all claims about its alleged unscrupulousness. It said the documentary was ‘edited and scripted to grossly represent the nature of those conversations’, which it says were led by undercover reporters. Alexander Nix said ‘emphatically’ that ‘Cambridge Analytica does not condone or engage in entrapment, bribes or so-called “honeytraps”, and nor does it use untrue material for any purpose.’ But if it does engage in those tactics, the effects are far-reaching. Executives say they have worked in more than 200 elections across the world, including in Nigeria, Kenya, the Czech Republic, India and Argentina. The firm is alleged to have harvested more than 50 million Facebook profiles. Mr Nix has been accused of misleading a parliamentary select committee. Cambridge Analytica are not in the middle of a reputation crisis, but a reputation catastrophe.
What to do? Alexander Nix, who today claimed the company is being unfairly targeted because of its connection to President Donald Trump, admitted his departure would be the ‘right thing to happen’ if it ‘is going to help the company’. That might be empty talk. But he’s right. That’s not just because he himself was involved in the scandal. It’s because with Nix at the helm, Cambridge Analytica will not be able to move on. And when a company is embroiled in a scandal of this magnitude, the best public declaration of contrition is a sacrifice.
The tradition that a captain goes down with the ship holds that the ultimately responsibility for the ship and everyone on it lies with the captain. It is much the same with a business. The CEO may not always be literally responsible for every misstep or crisis. But in becoming the CEO, a person takes responsibility for those underneath them. That’s why the CEO must sometimes fall on their sword. Travis Kalanick is the best recent example. He was held responsible for the many failings of Uber over several years and eventually, his position as CEO became untenable. You could even argue that he held on for too long. His successor, Dara Khrosrowshahi is still trying to reverse some of the damage.
The departure of Mickey Drexler from J. Crew received less attention. But Drexler failed to anticipate the shift to digital, and failed to move quickly enough. Then, the chain started haemorrhaging shoppers, who said the clothes fit badly and were too expensive. Drexler’s failure was commercial: though there was scandal or crisis, Drexler had to go for the good of the business. He had to be held responsible for J. Crew’s underperformance.
There are other examples. Marissa Mayer at Yahoo. Kwon Oh-hyun at Samsung. In total, 21 executives from a wide variety of industries stepped down last year––and these decisions are never taken lightly. But that doesn’t mean they weren’t the right decisions. With power comes responsibility, and in business, the buck lies with the CEO. Get used to it: in this era of never-ending scrutiny and increased accountability, we will see more and more business leaders fall.