Charm Offensive

Why America's CEOs are suddenly so eager to be loved

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It's hard to avoid Lee Scott's tender side these days. In April the Wal-Mart (WMT ) chief executive
told a convention of journalists that he plans to build stores in high-crime neighborhoods, in run-
down malls, even on contaminated land. Why? Not because these are the best places to put a
store. The idea, said Scott, is to "engage the community," reaching out to poor folks and
minorities, the kind of "people and neighborhoods that need Wal-Mart most."

While Scott tries to recast the often vilified retailer as a force for good, ExxonMobil's (XOM ) new
CEO, Rex W. Tillerson, is putting a friendlier face on the world's largest energy company, drawing
loud applause at the company's May annual meeting after an investor thanked him for his
"friendliness, humor, and candor." Then there's Anne M. Mulcahy, boosting morale by telling
Xerox (XRX ) employees to take their birthdays off. Or General Electric's (GE ) Jeffrey R. Immelt,
refusing his last cash bonus in favor of performance-linked shares to show that he's aligned with
shareholders.

Feel a sudden urge to hug a CEO? If so, it's likely because of all the thoughtful gestures and
warm words coming out of America's corporate suites. In the pageant of business, senior
executives seem to be battling for the congeniality prize. Humility, authenticity, and responsive
leadership are new buzzwords at the top. Many chief executives talk about being "servant
leaders" and team players. They care openly about everything from employees to Mother Earth.
In short, they're more likable.

While every generation has its share of both jerks and mensches in key jobs, there has been a
discernible shift in the management zeitgeist. Hubris isn't cool. Years of white-collar-crime
headlines, as well as grumbling over executive pay, have created an environment that's less
tolerant of boorish behavior. "Every CEO has a code of conduct and is eating in the cafeteria,"
says Leslie Gaines-Ross, chief reputation strategist at public relations firm Weber Shandwick.

Better to be bland, perhaps, than unpopular. Says Jon A. Boscia, chairman and chief executive of
Lincoln Financial Group: "When you're asked what you do, you used to puff out your chest and
say: 'I'm a CEO of such-and-such."' No more. Only 27% of U.S. respondents in PR giant
Edelman's 2006 Edelman Trust Barometer felt that information conveyed by a CEO was very
credible. (Business magazines rank higher, at 66%.) At least that's up from 2003, when,
according to boss Richard W. Edelman, "CEOs just went into the fetal position and didn't talk
much at all."

Now, CEOs have to talk to everyone. With greater transparency in business, there's no place to
hide. It's not enough to be popular with employees, board members, or the regulators perched
outside your door. In today's wired world, how you treat workers and the planet can quickly come
back to haunt you in a blog or I-Hate-Your-Company Web site. Anyone can find out what it's like
to work for you, says Libby Sartain, senior vice-president for human resources at Yahoo!
(YHOO ), and that "dictates what kind of talent you get" -- especially among younger workers.
And a new breed of execs, including Alan G. Lafley of Procter & Gamble (PG ), has started to talk
more about the concerns of "stakeholders" who feel the impact of a business, instead of just
shareholders.

POSITIVE IS MORE POTENT

That's not to say all CEOs are experiencing a sudden surge of love for their fellow man. As with
any management trend, there's an element of faddishness to the recent emphasis on humble,
engaging leadership. During the dot-com boom, the instinct was to play hard and strut around like
a rock star. CEO popularity revolved around a simple measure: stock price. Nobody had time to
hold hands. Even now, affability is not synonymous with morality. Nice guys can promote
recycling and still pollute, push ethical boundaries, or pay people too little. Few execs, after all,
were more charitable, more revered, and more public-spirited than Enron's Kenneth L. Lay. Nor is
likability tightly linked to profitability. Hot-headed, dictatorial leaders often get results.
ExxonMobil's former CEO, Lee Raymond, may have shunned investors, but he delivered great
earnings.

Yet current thinking has shifted to emphasizing the benefits of model behavior. "Nice is a power
tool," asserts Linda Kaplan Thaler, CEO of ad agency Kaplan Thaler Group and co-author of the
upcoming book The Power of Nice. "You get sued less often, you live longer, and you make more
money." A recent study in the Harvard Business Review found that people tend to choose work
partners based on likability. Professor Kim S. Cameron at the University of Michigan's three-year-
old Center for Positive Organizational Scholarship also cites studies showing that likable people --
those at the hub of what he calls "positive energy networks" -- are four times more potent on the
job than those who have influential jobs but are less popular. "Positive energy is the Holy Grail of
business right now," he says.

Rarely has there been more attention paid to personality in getting ahead. Mountains of
leadership books and hours of coaching greet most high-potential executives. The recurring
themes? Trust, inspiration, teamwork, authenticity. Jerks who deliver results are usually shoved
into somebody's hands to learn a little tenderness before rising to the top job. "People are proud
to have a coach now," says Judith Glaser, who coaches executive teams. "It shows they're being
emotionally cultivated for a better job."

In contrast, those who don't make an effort to win friends stand out. Robert L. Nardelli of Home
Depot (HD ) was widely regarded as an operational genius during his time at GE. But insiders say
Jeff Immelt performed equally well -- and also had an exceptional ability with people. Since
coming to the top job five years ago, Immelt has helped establish GE as a leader in eco-friendly
products, innovation, and even diversity. Over at Home Depot, Nardelli has been accused of
focusing on costs over customers, chipping away at morale, and ignoring shareholders. At the
May annual meeting, he stayed 30 minutes and refused to take questions. "How could anyone
not know that doesn't play in today's world?" asks one peer.

Surely, Nardelli couldn't have expected that his actions would go unnoticed. Now that everything
from retirement perks to personal e-mails are circulated on the Web, being a CEO can feel like
running naked. When Raytheon (RTN ) Chief Executive William H. Swanson plagiarized parts of
his feel-good Swanson's Unwritten Rules of Management from a 1944 book by W.J. King, it was
only a matter of time before a blogger exposed him. Harry C. Stonecipher of Boeing (BA ) was
forced to step down after an underling tipped off the board that the married CEO was having an
affair with someone on staff. "It used to be that the turnaround guys were the bad ones," says
Brian M. Sullivan, chairman and CEO of executive search firm Christian & Timbers, "but now
even CEOs running profitable businesses are getting vilified."

A NOD TO OUTRAGEOUS PAY

This is hardly the first time corporate leaders have put a benevolent face before the public. In the
1960s and '70s, as industry struggled to adapt to tumultuous times and the end of a booming
postwar economy, business leaders adopted more statesmanlike roles. Their message to
politicians and the public: We're all in this together. Earlier in the century, industrialists such as
Andrew Carnegie and John D. Rockefeller made a show of spreading their largesse after
amassing huge fortunes under controversial circumstances. More than a few critics accused them
of trying to buy back their reputations.

With the fortunes being accumulated by the executive class today, it's not surprising that leaders
feel a need to reach out. Median CEO compensation at 200 of the largest U.S. companies last
year hovered around $8.4 million. That's a 10% jump over 2004, according to Pearl Meyer &
Partners. John P. Mackey of Whole Foods (WFMI ), who caps his own cash compensation at 14
times the average of what all his employees make, argues that "when you have executives
gouging their companies, it undermines trust. Frankly, they aren't worth that much."

Outrageous pay is hardly the hallmark of a servant leader. The speech on "sacrifice" doesn't
resonate when it comes from someone whose bonus is in the millions. No wonder a small but
growing number of execs, from former Circuit City (CC ) CEO W. Alan McCollough to Susan Lyne
of Martha Stewart Living Omnimedia (MSG ), are giving back cash. Says Lyne, who gave a third
of her $625,500 bonus to employees: "You can send a signal that your focus is on compensation,
or you can show that your focus is on creating a better, stronger company."

Playing to a wide audience and cultivating positive publicity often does help the company. John
Browne, group chief executive at BP (BP ), has spent millions trying to make his company the
nicest, greenest oil giant on the block. While ExxonMobil is pulling in bigger profits, BP has
posted stronger growth and better stock performance since 2001. In that time, BP has delivered a
total shareholder return of 62%, compared with ExxonMobil's 49%. "We have to be responsible
as a company and attract the best people of every background," says Browne, who won BP the
prestigious Catalyst Award this year for advancing women in the organization. Such good vibes
helped the company emerge with its reputation largely intact after a devastating refinery
explosion in Texas last year that killed 15 people and led to a $21.3 million fine.

ExxonMobil's Raymond, in contrast, made money for investors but never did much to warm the
public's heart. Greenpeace research director Kert Davies says "shareholders -- really nice people
like priests and nuns -- tell me they have never dealt with anyone as stubborn, self-important, and
rude." An ExxonMobil spokesman said Raymond doesn't comment on such observations. But it's
notable that his successor makes a point of cracking jokes with journalists and listening politely to
investors. To executive leadership consultant Granville Toogood, Tillerson comes "across as a
humble, concerned citizen of the world." The business strategy hasn't changed. The CEO is just
nicer.

Even energy industry bosses know that friendly gestures get you noticed in the press -- and by
your peers. In fact, James O'Toole, a professor at the University of Southern California's Center
for Effective Organizations, thinks many execs are just jealous of all the attention being heaped
on nice guys. He believes the charm offensive comes down to a basic instinct: "What do I have to
say to get the spotlight back on me?" Moreover, he notes: "Who wants a reputation for not caring
about employees or your own country?"

No one who wants to make it in business. Increasingly, the most important fan base is the one
within your own company. Younger staffers simply won't stick around to work for idiot bosses.
They grew up accustomed to a freelance "open source" world, and their boomer parents raised
them to demand respect, independence, and engaging work. Their reaction to a command-and-
control leader who blasts off mean missives or ridicules customers? Post the comments on a
blog.

Treating people well makes you feel good. It makes others feel good. It can even cast a glow
around your company. But the biggest incentive to woo the masses is a growing belief that it
benefits the bottom line. As consultant Tim Sanders, author of The Likeability Factor, puts it: "If
the average employee has a pit in his stomach instead of a song in his heart, your profits will go
down."
By Diane Brady