CEO Blind Spots That Can Put the Company at Risk

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In the competitive arena of corporate leadership, the distinction between a flourishing company and one that falters often hinges on the awareness and actions of its CEO. But even the most visionary leaders are not immune to oversights that can compromise the integrity and prosperity of their business.

Blind spots are pervasive yet often unrecognized behaviors that can subtly corrode a company’s culture and derail its performance. Following are blind spots that, if left unchecked, can obstruct a CEO’s effectiveness and endanger the company’s success. By recognizing and rectifying these leadership oversights, CEOs can steer their company away from potential pitfalls and toward a trajectory of sustainable growth and achievement.

The Prevaricator: Creating False Narratives

The Prevaricator creates a convenient narrative to serve his or her own purposes. Prevaricators are often braggarts, undervaluing or ignoring evidence that is clear to others. Gregory Becker, the CEO of the now-defunct Silicon Valley Bank, illustrates this behavior. The New York Times reported that while testifying before Congress after the bank collapsed in March, Becker was asked by one senator to identify any of his own mistakes. “Mr. Becker said he had thought about the question every day for the past eight weeks, and could not come up with an answer,” the Times wrote.

Among the mistakes others saw clearly were Becker’s decision to buy “risk-free” government bonds without actually analyzing the risks; holding a high percentage of accounts above the insured limit of $250,000; and cashing out millions of dollars in stock options weeks before the bank failure.

In an analysis of the bank’s collapse, New York Times reporter Maureen Farrell noted that Becker told an audience of investors, analysts and tech executives just a week earlier that “the future of the tech industry was sparkling — and so was Silicon Valley Bank’s place within it.” This despite the fact that about a week earlier, Moody’s had called to Becker to say that his bank’s bonds were in danger of being downgraded to junk.

“Just one day after Mr. Becker projected confidence at the conference, the bank announced a $1.8 billion loss… By Friday, Silicon Valley Bank was dead,” Farrell wrote. Two other lenders, Signature Bank and First Republic, also collapsed.

The Prevaricator, often a braggart, is overconfident and oblivious to warning signs. In fact, Becker “pointed the finger at pretty much everybody but himself, casting blame on regulators, the media, his board of directors and even the bank’s own depositors,” the Times reported.

The Cowardly Lion: Avoiding Tough Calls

In the corporate world, the Cowardly Lion avoids tough calls until under pressure, often chooses financial considerations over principles and focuses on the short term ran than the long term. Northwestern University President Michael Schill demonstrated this behavior when deciding how to respond to an independent investigation of hazing in the Big Ten university’s football program.

In November 2022, the university received a complaint about hazing, and hired an outside law firm to look into it. According to the university’s summary of the investigation, football players were pressured by other team members to participate in hazing in the locker room and at training camp. The investigation team found evidence, including first-person accounts from current and former players, supporting the complainant’s accusations.

However, the investigation did not discover “sufficient evidence to believe that the coaching staff knew about the ongoing hazing conduct,” although there had been “significant opportunities” to do so. As a result, in July the university suspended head football coach Pat Fitzgerald for two weeks without pay and took other actions to address the issue. The suspension was a slap on the wrist; Fitzgerald would typically do little or no coaching or recruiting in mid-summer.

The day after Fitzgerald was suspended, the Daily Northwestern published a detailed account of the hazing from an unnamed former player, including “coerced sexual acts” and extreme humiliation. A second unnamed player confirmed the account. Later that day, Schill issued a public statement. “Upon reflection, I believe I may have erred in weighing the appropriate sanction for Coach Fitzgerald. …In determining an appropriate penalty for the head coach, I focused too much on what the report concluded he didn’t know and not enough on what he should have known.”

In a July 10 article, the Daily Northwestern quoted three former Northwestern players describing “multiple racist actions and remarks from both coaching staff and players.” Later that day, Schill fired Fitzgerald.

“As much as Coach Fitzgerald has meant to our institution and our student-athletes, we have an obligation — in fact a responsibility — to live by our values, even when it means making difficult and painful decisions such as this one,” he wrote.

Since the articles revealed information that the university must have known from the investigator’s report (and was never released), it seems clear that Schill bowed to pressure generated when the severity of the problems was made public. Ironically, he passed on the opportunity for the university to live by its values until the scrutiny was so intense that he had no choice but to fire the coach.

Condescension: The Smartest Person in the Room

The Smartest Person in the Room typically refuses to listen to those who express opposing points of view and rejects others’ ideas out of hand.

Richard Fuld is the quintessential example of this behavior. Fuld is the former CEO of Lehman Brothers, the storied brokerage firm that filed for bankruptcy on Sept. 15, 2008, after 158 years in business. It was the largest bankruptcy filing in U.S. history and the trigger for a widespread financial crisis. The bankruptcy, resulting largely from Lehman’s enormous investment in risky subprime mortgages, came after several attempts to negotiate financing for Lehman’s reorganization failed.

Among those angling to purchase a major portion of Lehman’s assets was the Korea Development Bank. Its CEO, Min Euoo Sung, had once worked at Lehman, and hoped to make his mark through this outsized deal. The Financial Times reported on the day of the filing that Fuld met with KDB in early August, but “gave out virtually no information about Lehman’s holdings,” according to one adviser who was present. According to the Times: “’The Koreans were very receptive,’ says this person. ‘But then he [Mr. Fuld] tried to change the terms. The deal went away.’”

In his definitive book, Too Big to Fail, Andrew Ross Sorkin described what happened in more detail. At a meeting in New York, Sorkin reported, “It quickly became clear that Min wanted nothing to do with Lehman’s commercial real estate holdings. …It looked like the talks could collapse. But that afternoon the two sides started working on a new structure.” Min would buy a majority stake in Lehman if it spun off its real estate assets into a separate company. “The discussions seemed to be going well,” Sorkin wrote. The Lehman team’s goal was to convince Min to sign a letter of intent in advance of the final agreement to help stabilize the stock price.

When the parties reconvened later that evening, Fuld unexpectedly joined the meeting. According to Sorkin’s account, Fuld told Min. “I think you’re making a big mistake… There’s a lot of value in these real estate assets.” Fuld also suggested that Min pay 1.5 times book value, rather than Min’s stated offer of 1.25 times book value.

The Lehman executives “couldn’t believe what they were witnessing. They had spent the past two days orchestrating a deal based on spinning off the real estate assets, and now Fuld was trying to retrade on their work. Worse, a look of horror crossed Min’s face.” Ultimately Min, distressed about how Lehman senior management conducted the negotiations, left the meeting to fly back to Korea, leaving a colleague to “continue the dialogue.” The deal collapsed.

The Bully: Ruling by Abuse

The corporate bully is the adult version of a character we all recognize from childhood. Bullies pick on the less powerful, don’t tolerate disagreement, blame others when things go wrong and rarely admit mistakes. They harbor a massive blind spot, believing that their talents and success justify their means. And they seem oblivious to the consequences of their behavior, which can include lawsuits, large settlements, wasted talent and lives harmed or destroyed.

The entertainment industry is rife with bullies. In 2020, the Hollywood Commission issued a report which found that “the entertainment industry is, unfortunately, a breeding ground for bullies who are typically highly ambitious, opportunistic, combative, powerful and competitive.”

A stellar example is Scott Rudin, one of the industry’s most honored producers, with 23 Oscars and 17 Tony Awards. Rudin is notorious for throwing objects at horrified staff, Vulture reported. Among other intimidating and aggressive behaviors, Rudin smashed a computer monitor on an assistant’s hand, threw a laptop at a window and screamed at an underling, “You’re worth nothing,” according to the Hollywood Reporter.

The Bully discourages disagreement or debate, thus shutting himself off from others’ opinions. A former assistant quoted by Vulture noted, “If you’re trying to set the record straight or defend something and it reads to him like you’re not hearing or accepting it, he’d do something explosively violent — flip a desk, throw a fax machine, break a phone in half. It’s like having a debate with a wolf or a bear.”

In another typical bully behavior, Rudin “was able to pivot from berating staff to turning on the charm as soon as talent walked in the door,” according to a former employee quoted in the Hollywood Reporter.

Producer Robert Fox told Vulture, “I honestly don’t think he thought it was a terrible thing. It was part of his modus operandi.”

The above behaviors not only undermine the foundation of a company but also erode trust and stifle innovation. Leaders must cultivate self-awareness, actively seek feedback, and be willing to address their weaknesses. By doing so, they not only safeguard their companies from risk but also set the stage for a culture of transparency, accountability, and continuous improvement. This shift is not merely about avoiding failure; it is about aspiring to a higher standard of leadership that ensures long-term success and sustainability.

Susan Lucia Annunzio is the President and CEO of the Center for High Performance and an Associate Adjunct Professor of Management at the University of Chicago Booth School of Business. This article is adapted from www.ChiefExecutive.net with permission from Chief Executive. © 2024. All rights reserved.