Black MBA - Winter 2007/2008 - (Page 24) FEATURE Inside the Corner Office millions of dollars each year in salary, bonuses and stock options, requires political savvy as well as talent. “Rising in corporate America is really more about who you know than what you know,” explained Broussard, the former stockbroker. “Business is a game, and the people who win know how to play it very well. Blacks who want to move up need to observe the best player in the corporation and align themselves with him or her. And this isn’t brown-nosing. It’s being smart.” No African American has risen to CEO without the strong support of at least one senior white executive. In the case of Ken Chenault of American Express, first it was Louis V. Gerstner Jr., the head of American Express’s Travel Related Services division, who later became chairman and CEO of IBM. Chenault also had the backing of CEO Harvey Golub, who announced in 1997 that Chenault was “the primary candidate to succeed me when the time comes.” Parsons took a different route to the executive suite. While serving as CEO of Dime Bank in 1991, Parsons was invited to join the board of Time Warner by then-CEO Steven Ross. Gerald Levin, Ross’s successor, recruited Parsons to become president of the company in 1995. In this position, he oversaw Time Warner’s film entertainment and music business as well as financial, legal, public affairs and administration areas. He also helped negotiate Time Warner’s merger with AOL in 2000. When Levin announced in December 2000 that he would be retiring, he also announced that his successor would be Parsons, who had vaulted ahead of Robert Pittman, the chief operating officer previously favored to succeed Levin. RISKY BUSINESS Anderson pointed out an important difference between O’Neal’s forced exit and Parsons voluntarily stepping down. “I don’t see any significant impact of two Black CEOs leaving, mainly because the reasons for O’Neal and Parsons leaving their positions are very, very different,” he explained. Parsons will retire as CEO of Time Warner having accomplished his mission, Anderson said. But this was not the case for O’Neal. “O’Neal lost his job because he violated one of the basic principles of CEO behavior, and that is, you don’t surprise your board,” Anderson stated. “He surprised his board and lost their confidence, which meant he had to go.” One surprise was the numbers O’Neal supplied the board of directors. O’Neal’s team predicted a 2007 thirdquarter loss of $4.5 billion only three weeks before this figure was revised drastically to $7.9 billion – 76 percent more than the board had been led to believe. “What that showed was he was not on top of this issue,” Anderson said. Much of the loss was tied to Merrill Lynch’s venturing deeper into the high-risk area of collaterized debt obligations, known in the industry as CDOs. Essentially, CDOs are complicated debt instruments created from a hodgepodge of fi nancial vehicles such as bonds mixed with subprime mortgages. “CDOs are structured in a way where it was very difficult to estimate the value of those instruments and to know the risks,” Anderson explained. “These CDOs initially produced a high rate of return on investment. At a time when the federal funds rate was about 4 percent, when a bond was paying 5.2 percent, you might buy a CDO that would yield 8 percent or 9 percent. They were generating a lot of revenue because of what was in there. But this was high-risk, and Merrill Lynch did not have on its staff people who were paying attention to the riskiness of this type of instrument.” The company became more involved in the subprime market after it purchased First Franklin, one of the country’s largest originators of subprime loans, in December 2006 for $1.3 billion. “You can see it on the charts. Shortly after O’Neal came in, stock in- step – selecting African Americans to serve as CEOs. Irvin views the achievements of O’Neal and Parsons as more significant than what Jackie Robinson did in 1947. “We don’t place nearly enough emphasis on high-ranking Blacks as role models,” he said. “We all know Jackie Robinson’s story because he crossed the color line in baseball, but few of us know the story of Ed Boyd, who during the same year was the first Black executive appointed to a management position by Pepsi-Cola. Imagine how different Black America – and all America – would be today if we had focused more on economics and business heroes instead of just sports heroes over the past 60 years. We need to focus much more on the role of business leadership in the future.” THE NAME OF THE GAME While acknowledging the pride African Americans take in the accomplishments of O’Neal and Parsons, Wharton’s Anderson cautions against reading too much into their departure. “I hope Black people don’t misread what this means,” Anderson said. “Yes, you can get there, but when you get there, you’ve got to perform. You’re not going to get there because you’re Black and you’re not going to be kicked out because you’re Black. These are not affirmative action jobs.” Rather, Anderson said, it’s all about improving a company’s bottom line. “If you put a Black person in and he can make you a million dollars, you say, ‘I don’t care what color he is. I want that million dollars.’” Reaching the highest echelon of corporate America, where one receives 24 BlackMBA • Winter 2007/2008 • www.nbmbaa.org Charles Ommanney/Getty Images http://www.nbmbaa.org
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