Thursday, 1 March 2012

Hollywood Babble On & On #859: CEO/Chairman/Shogun/Emperor

The fur is flying between Wall Street and Disneyworld because the Institutional Investor Service, is asking Disney's shareholders to vote "No" at making current CEO Bob Iger Chairman of the company, saying that he's already too rich and too powerful.  The new job will give him a bump in pay from $26 million to $30 million as well as more power.
 
Disney's reps are saying that Iger's worth the power and money, stating that $100 in Disney shares purchased is now worth about $171, and the company's profits are good and that he's “among the most successful and well-regarded chief executive officers in the media industry.”

Well that's all well and good, but there's something people are forgetting, and that something is that the CEO and the Chairman of the Board are different titles because in the grand scheme of things, they are two different jobs that are probably best held by two different people.

Which means that I have some explaining to do, and I'll start by explaining the jobs.  (And I will be using "Chairman" even though the post can be held by a woman, it's just quicker than writing "Chairperson" plus I'm deeply sexist.)

The CEO, or Chief Executive Officer, also called the Managing Director in the UK, is the organization's top administrator.  It is their job to handle the overall management, problem solving, and general running of any corporation or large organization.  The CEO is appointed to their position by the Board of Directors, which is headed by the Chairman.

The Chairman of the Board is the chief representative of the shareholders.  You see in any publicly traded company, the ownership is scattered among thousands of individual and institutional investors.  Without the voice of one owner they need to get the voices of all the investors together, in the form of a Board.  The board are elected by the shareholders to represent them and their wishes when it comes to the running of the company.  A chairman is elected from among the board members to be their chief representative, coordinating board business, and acting as their direct liaison with the Chief Executive Officer.

Now I like to use historical analogies when I try to explain things, and the closest one I could find are the roles of the Emperor and Shogun in Japan before the Meiji Restoration of the 1800s.

Japan is a constitutional monarchy now, but back in the olden days it was an absolute monarchy.  Not only was the ruler, the emperor, absolute in his power, he was also considered divine. This divinity began to mean that the emperor was just a little too elevated for a lot of the day to day administration of the empire.   Now when times were smooth, the job was handled by various imperial bureaucrats, but when the nation hit some bumps on the road that job fell on the lap of the Shogun.

Shogun's title originally started as the rank of the man in charge of defending Japan from foreign invasion, hence the full title's rough translation being "Supreme Barbarian Suppressing Generalissimo."  

Over time the title went from being purely military to encompassing the whole of the business of government.

I have no pictures of Shoguns, so here's movie bad ass Toshiro Mifune
At best the Emperor, like a good Chairman, stood as the final word, setting policy expressing the will of the gods, (or the shareholders) and letting the Shogun work out all the petty mechanics of implementing the policy.

But there were two traps in this system, one leading to another, and these same two traps.

The first trap is the "Rubber Stamp Trap," this is where the Emperor/Chairman essentially gives up their role of asserting the will of the shareholders and letting the Shogun/CEO set the policy without much scrutiny.  This leads to the second trap which is the...

..."Fuzzy Line Trap."  This trap involves the further devolution of the split between Emperor/Chairman and the Shogun/CEO.  It happens gradually, with the CEO pawning off more and more decisions to underlings, judging themselves too "divine," "important," or "busy" usually playing golf, to do it themselves.  Usually the board is stacked with friends and allies, thus ensuring that any shareholder discontent is prevented from reaching the newly divine CEO/Chairman hybrid.

The problem is that without a clear voice for the shareholders, and a clear voice for the management, troubles will arise.  The right hand no longer knows what the left hand is doing, and vice versa, and things begin to gum up the works.  This happened near the end of the Tokugawa Shogunate with Shoguns forgoing their ground-level management role, for one of near worship as being near divine like the emperor.

That's why I can understand why ISS is feeling iffy about Iger being both Chairman and CEO.  No matter how good the person in question is at their job, it's usually more trouble than it's worth.

3 comments:

Anonymous said...

Eisner 2 - the sequel. Well, there's nothing like the globe spanning Disney media empire for "doing good" and gently convincing the movie going, cable watching, fantasy loving, young child distracting public to "Vote for the leftmost viable candidate".

Lorne said...

I think you've confused the CEO with the COO. Additionally, the Japanese monarch has traditionally been a figurehead, even in feudal times.

Furious D said...

COO is a position needed when the CEO is too lazy to do their job. ;)

Plus, I'm using a sort of "what it's supposed to be" scenario when it came to the whole shogun/emperor relationship.