Chief executive officers (CEOs) are valuable assets to our society. They are the protagonists who create countless jobs and lead innovation in the national economy. Personally, they are highly intelligent individuals who have reached their positions through exceptional insight and tireless effort. Yet we often witness the paradoxical phenomenon of these smart and capable leaders falling into crisis or driving entire companies toward ruin.
Why do intelligent CEOs sink into the mire of crisis? Only by understanding this phenomenon from multiple angles can we halt the recurring cycle of CEO crises.
The trap that drives leaders into crisis is a peculiar arrogance unique to successful leaders: hubris. Derived from ancient Greek, the word refers to excessive self-confidence and pride great enough to challenge the realm of the gods. A string of successes instills strong confidence in a leader, but beyond a certain threshold, it degenerates into a confirmation bias that one's own judgment cannot be wrong. The case of Ron Johnson, who was revered as a genius after creating the Apple Store legend, is highly instructive. After becoming CEO of U.S. department store JC Penney in 2011, Johnson recruited former Apple executives and tried to transplant Apple's formula for success. He abolished periodic bargain sales and introduced an everyday-low-price policy, but the stock price and sales plunged by nearly half, and the CEO was dismissed. More recently, one cannot help but wonder whether the roller-coaster-style social media messaging strategy that U.S. President Donald Trump deployed during the Iran war-ending negotiations, while perhaps a negotiating tactic, was also a manifestation of the hubristic belief that he could control every situation.
The spiral of silence among organization members can also become a CEO crisis. The spiral of silence refers to the phenomenon in which employees, wary of the majority opinion or of their superiors, refrain from voicing differing views and gradually close their mouths. The stronger a CEO's power becomes, the more the organization transforms into a giant echo chamber where only information palatable to the leader circulates. The 2023 large-scale quality-rigging scandal at Daihatsu, a subsidiary of Japan's Toyota Group, illustrates this. At Daihatsu, effectively Japan's first automaker, management pushed to shorten development schedules in the short term, and frontline engineers hesitated to speak up about physically impossible timelines and safety concerns. The fear that raising objections would bring disadvantages silenced the employees. After establishing a third-party committee to investigate, Toyota Group announced that Daihatsu had committed 174 irregularities related to quality certification over 35 years.
A company is a tree that grows by feeding on performance, but excessive short-term performance-ism threatens a company's very existence. The case of Switzerland's Credit Suisse, which was pushed to the brink of bankruptcy and acquired by a competitor in 2023 after 167 years of history, offers a lesson. At the time, management chased immediate high returns by pouring large sums into high-risk funds such as British fintech firm Greensill Capital and Archegos, which was led by a famous fund manager. Warning signals from the risk management department were not adopted by management under the pretext of short-term results. The price of condoning potential risks for immediate profits and sacrificing the company's long-term reputation was Credit Suisse's sale to UBS.
So how safe are the CEOs of our companies from crisis? I propose diagnosing a CEO's vulnerability to crisis using three indicators. First, the skew in time allocation. When analyzing a CEO's schedule over the past month, it is a warning sign if more than 80% of the people they meet are internal executives or friendly figures from the same industry. Second, the share of speaking time in meetings. If the CEO's speaking time exceeds 50% of the total in key executive meetings, that meeting has degenerated from a discussion into a forum for directives and lectures. Third, the speed at which bad news is reported. Measure how long it takes for bad news from the field to reach the CEO's desk. If good news is reported within a day but bad news takes a month or is omitted, that organization's crisis management system has a problem.
The path to preventing CEO vulnerability to crisis lies in ensuring that organization members feel psychological safety. The traffic-light report case of former Ford CEO Alan Mulally, who saved the automaker from the brink of bankruptcy in the mid-2000s, is telling. At an executive meeting held after his inauguration, while department heads submitted green (good) reports, one executive presented a red (problematic) report acknowledging a vehicle defect. As silence fell over the meeting room, Mulally applauded him and encouraged him, saying that a clear recognition of reality was the beginning of problem-solving. From that moment, Ford's speed in reporting bad news accelerated, and within two years of Mulally's inauguration, the company posted a quarterly profit and the organization revived.
A crisis is not a misfortune that suddenly falls from the sky one day. It is the product of accumulated internal silence and a leader's arrogance. No matter how smart a CEO may be, no one can break through the age of complexity with their own intelligence or capabilities alone. To be reborn as a leader who is truly resilient in crisis, one needs the courage to open one's ears to the harsh voices around and to reflect on oneself.
