RUTH SUNDERLAND: A Leadership Lesson for Firms

Accidental power grabs. Incredible comebacks. Unbridled ego. Epic acts of betrayal and improbable ascents to high office are all as much a feature of the FTSE 100 boardrooms as they are of the latest Tory leadership contest.

In business, the main cause of disaster is not hostile markets or unforeseen black swan events, but the human fallibility of leaders.

Fortunately for shareholders, most companies are more careful about choosing and retaining their leaders than the Tory party. Succession planning is taken very seriously. Boardroom bigwigs and a group of headhunters usually compile a long list of external and internal candidates.

Not all corporate transfers go smoothly. But processes must be in place, as must security systems in case of an unexpected departure. A Rabbit lasting just 44 days is unimaginable in the corporate world, no matter how terrible the CEO’s job was.

The average life expectancy of a FTSE 100 chief executive is just under six years, roughly twice as long as Boris Johnson or Theresa May spent in Downing Street.

If any company followed the Tories and sacked two disgraced bosses in the space of a few months, then considered bringing the first one back, that would be a strong sell signal to say the least. Business leaders watched the events in Westminster with as much horror as the rest of us.

Many of the companies on the FTSE 100 list are international and are led by executives from abroad. They must be wondering what in the world is going on in their adopted country.

Executive priorities being what they are, some will wonder how much better they can be if jobs are paid in dollars rather than weakened sterling.

There are lessons businesses can learn from the uneducative psychodrama. The most obvious is the importance of creating a cohesive corporate culture. Any company that allowed itself to descend into the swarming hives of dissent and division like the Tory party would find shareholders unforgiving.

Strong management is another. Leaders who flout the rules of governance pander to investors — and voters — even though they appear to be succeeding, but if they falter, they’re likely to lose friends. Weak boards are exposed in hard times.

Investors may also wonder about the personalities of corporate leaders and whether they are putting their own interests ahead of the company and its stakeholders.

One of the most interesting CEOs I’ve interviewed over the years was Chris Viscarson, who was trying to turn around failing pension giant Equitable Life several years after it had been driven to collapse by previous executives.

After sifting through the wreckage, he concluded that the fault lay not with complex annuity guarantees, as is the usual diagnosis of Equitable’s downfall, but with sheer hubris.

Executives, he said, should be made to take regular psychological tests to detect signs of megalomania and to see if they are in touch with reality by listening to regulators, colleagues, regular customers and staff. Not a bad idea, neither in business nor in politics.