CEO of Starbucks Howard Shultz

I recently read an article about how the CEO of Starbucks is to join the board of the new and very successful online coupon company, Groupon.  He was elected to this position because Groupon is soon to launch a public offering, and the leadership that Shultz has displayed in the past is something that is very inticing.  Shultz helped build the Starbucks empire, left the company for a short time, and then returned when the company struggled through a downturn.  This article indicated that he lead Starbucks back to a period of growth by laying off workers, launching an instant coffee line, and implementing a digital network.

These qualities of leading change really emphasize the path-goal theory of leadership and displays the leader behaviors that are within.  This theory is about how leaders motivate subordinates to accomplish goals, which in this case can be considered as returning Starbucks back to a growth stage of a business model.  The directive leader behavior, defined as giving subordinates instructions about their task, is seen in Shultz because he has conveyed to his company that Starbucks will return to growth through these new products and services.  An achievement-oriented behavior, which challenges people to perform at the highest level, can also relate to that fact because he knew it would not be easy to once again become the coffee chain leader, but it was very possible.  I believe that the supportive leadership behavior, a considerate quality, was also shown in this article because he decided to come back to Starbucks, even during a downturn, a try to regain its dominance.  The last leadership behavior, participative, which consists of inviting subordinates in the decision-making process, was a large part in this situation as well.  After not being with the company for a while, he had to listen his subordinates' ideas and opinions to best understand the situation at hand.  

Posted by: Jon Pieper

http://news.yahoo.com/s/ap/20110210/ap_on_hi_te/us_groupon_schultz

Should More CEOs Be Fired?

Research has shown that if it wasn't for the close personal ties that CEOs have with their board of directors most CEOs would have been fired sooner. This relationship not only applies to keeping the CEOs on staff but also to the severance pay they receive when leaving the company, like when Googles CEO was let go the Google gave him a 100 million option and stock grant. When company's give huge stock options like this it hurts the regular stock holders by lowering the value of their stock and is giving stock past CEOs really that great or a parting gift? The CEOs dont have to keep the stock so when they sell it they end up getting even more money for doing absolutely nothing.

The percentage of  CEOs that research shows is 2% but as Taylor did more research he figured that the true percentage would really be closer to 13% if it wasn't for the relationships that were developed. When the board of directors saw that a CEO wasn't doing such a great job and hurting the company, instead of letting them go they would just move them to a different position in the company which decreases the turnover rate. The board of directors take a big risk when they decide to let a CEO go, they risk losing their position on the board because the new CEO wants to put people on the board that they know and already have relationships with.  The new CEO has the five bases of power, referent power because the old board of directors is going to like the new CEO so they can keep their jobs. Expert power because the CEO has to be good at their job if the made it all the way to CEO. Legitimate power because the hold the CEO position. Reward Power being able to give out rewards even tho is seems as if the CEOs get most of the rewards the board of directors also has this power when they give out bonuses. Coercive power, the CEO has this because they are CEO and in charge of the company, but the board of directors also has this power by being able to vote against the CEO and having them resign.

Some researches think that the board needs to redesign their hiring and firing practices, the board needs to look at all aspects of the new leader and not just certain traits or skills that the potential CEO has. If a board of directors is using the trait approach then maybe they should start to use the skills approach, or the board could incorporate both approaches.   



Post by: Juliann Brouette
Article can be found at http://management.fortune.cnn.com/2011/02/08/should-more-ceos-be-fired/

Co-CEOs: A Good Idea Or Not?

Many companies such as Goldman Sachs and Unilever have tried unsuccessfully to have two CEOs running the company. Yet the retail chain Aéropostale decided to appoint President Mindy C. Meads and Chief Operating Officer Thomas P. Johnson as the new CEOs to succeed Julian R. Geiger. Matthew Boyle, the author of the article "When the CEO Job Is Split in Two", believes that this could be sabotage to the company's recent outstanding performance. The question posed is whether or not a company can continue to be successful with clashing egos and skills of two CEOs.

Some companies, such as the California Pizza Kitchen, have been profitable with two CEOs, but many wonder if a company can flourish if the co-CEOs did not start together when the company was small. Both newly appointed CEOs have their own set of skills and expert knowledge, as Boyle highlights in the video that can be found in the link at the bottom of this blog. Meads is a merchandising expert and Johnson is a store operations expert. They both have separate crystallized cognitive ability, personalities, and career experiences that can work together to continue the success of Aéropostale, yet could these also get in the way of leading together? Could their separate knowledge acquired over their careers create problems in solving complex problems as a whole? It is clear where their skills lie, but will their skills and egos get in the way when it comes to deciding the direction for the company? The skills approach that we have discussed in class could be applied differently for the two CEOs at Aéropostale, and this could impact the high performance of the company if they cannot successfully work together.

What do you think? Is it a good idea to appoint co-CEOs? Or should companies not even bother appointing co-CEOs?


link to article and video: When the CEO Job Is Split in Two


Blog by: Rebekah Pinson

Coca-Cola CEO

Coca-Cola is one of the most successful global companies in the world today, and its CEO, Muhtar Kent, is a big reason why this is so.  He has fostered a culture that is continually changing in order to stay competitive in many different cut-throat markets.  The video link below, from fortune.com, describes the best advice that Coca-Cola's CEO has ever received.  This advice has instructed Kent to always look forward into new endeavors and to not stand still and look in the mirror.  This is an essential business principle as it has worked for Coca-Cola and many others.  A combination of both task and relationship approaches to leadership are found in this clip.  The task is evident to keep innovating and looking for opportunities to grow while the CEO also enforces the importance that he uses this advice in his personal life.  With this being said, this leader is conveying to his followers that he really believes in what he is doing.  Take a look at this video and see what you get out of it.  He seems like an interesting person.   

http://money.cnn.com/video/news/2011/02/04/best_advice_muhtar_kent.fortune/

Blog by: Jon Pieper

Raise or No Raise?

With the growing age of CEO distrust and corporate failures, now is the time for investors to look at top management for guidance.  Within in the last week The Securities and Exchange Commission (SEC) has announced that companies “whose stock-market value exceeds $75 million must give shareholders the opportunity, at least once every three years, to voice their approval or disapproval of how top management is being paid” (Zweig). This change is now allowing investors to determine if CEO’s pay is related to their performance. However, investors need to have information presented to them in a clear and concise manner if an accurate decision is to be made. Zweig further states that there will be a “standardized model of pay disclosure” thus allowing investors to actually read the proxy statement before voting.  The fact that this is now mandatory for the companies that meet the requirements could generate a higher CEO turnover among other issues.

Upon further review of this topic, it is clear to see that the SEC is enforcing a process definition of leadership by allowing the shareholders of a company to have feedback on the pay of top management. There is now a two-way communication between CEO’s and shareholders, which is a first for most large companies. This communication model supports the theory that leaders need constant feedback from everyone in the organization, including shareholders, in order for the company to prosper. Whenever there is an open door policy such as this, there is a large margin of error. As mentioned in class when leaders are presented with feedback from followers some are too honest while others are too timid to voice their true emotions. Group think could result from from majority shareholders overpowering the minority. This is dangerous, considering that for every 1% increase in a "NO" response, there will be a maximum wage decrease of $220,000 (Zweig). So what is preventing the shareholders from either going with the majority's lead or simply denying every pay raise presented to them? Nothing. The SEC is more concerned with the current disclosure issues on pay rates more than they are concerned with executive's pay level. If the leaders of these organizations band together and sway the vote of shareholders in their favor, this mandate will become useless. There needs to be thorough research to invoke this change in the way that it was intended, as it stands right now there are too many work-arounds that will soon be explored by CEOs wanting to continue their current income increases. The idea sounds great as of right now, but the implementation will need to have a strong enforcer, or leader to make this work properly.

The SEC has made a bold move by creating this mandate, and forcing CEO’s to present clear information about payment structure. Yet, if the SEC plans to dig deeper and force more transparency within an organization, how long will it be before shareholders will have their hands on the meeting notes from last Friday?

How much is too much?

Posted by: Drew Alfrey

For more information please read this article which can also be found online here.

*Zweig, Jason (2011, January 29-30). A Chance to Veto a CEO's Bonus. The Wall Street Journal, pp. B1, B17.