L’entreprise, c’est moi!

In a way, I do not blame the Sun King himself. He was given a platform from his infancy and throughout his life, while supported by key stakeholders for unconditional sovereignty. He did not know any better, and genuinely thought of himself as the nation.

Similarities are striking to what we are increasingly witnessing in the business landscape, and not just in Silicon Valley. Some of the CEOs, particularly if they are also founders, do not, or cannot, distinguish themselves from their companies, as the cult of personality around them makes them incapable of differentiating their organizations from themselves. L’entreprise, c’est moi!

Furthermore, the equity distribution of those corporations makes it practically impossible to dismiss, or even rein in, those CEOs via the board of directors or shareholders vote. Those boards do not resemble any different than the court of Louis XIV, and due to the high equity stake of those executives, shareholders are not empowered sufficiently.

Separating ownership from management of industrial complexes, which took place around the dawn of the 20th century, led to an incredible business advancement that in turn created national prosperity. Professional managers took on the responsibilities of running increasingly complicated and multifarious businesses. That was a huge paradigm shift.

Coupled with the steady expansion of the public capital market, the American industrial miracle of last century became most dazzling. Though not quite linear, nevertheless the industrial revolution reached its apogee, despite some pain along that trek.

But, we are sadly regressing from those two primary elements that brought us where we are today. Knowingly or unwittingly, we have come to accept unicorns in the technology and life-science spaces — the companies with more than $1 billion in valuation that make no money. Worse yet, no limit is put on the amount of time these enterprises can burn cash.

I do not make a distinction between public versus private loss-laden companies, it being argued often these days that we ought not to care much what happens inside private companies. Those large nonperforming private corporations continue to receive capital from institutional investors, say, retirement systems of public employees, hence needed scrutiny and caution for where that money goes.

At the core of the problem is demigods created by a cohort of star-gazed admirers, some with investments in those entities, others with no skin in the play, ergo a complete ecosystem of support not unlike the court that surrounded the French monarchy. This also assumes that any celebrity CEO needs to be wacky and a loose cannon before taken seriously. After all, the Hollywood version of a “genius” is typically a zany character.

That’s far from reality. Bob Crandall (American Airlines), Herb Kelleher (Southwest Airlines), Andy Grove (Intel), Ginni Rometty (IBM), Meg Whitman (eBay, HP), amongst many more, are examples of CEOs that took the helm at a crucial moment. They did not lack one iota of intelligence from those being nonchalantly promoted today as “geniuses,” but they also exhibited incredible talent and discipline, notwithstanding different styles and practices, to run large public corporations, create wealth for shareholders and in the process make a lot of money for their companies.

Listening to some of these executives billed as prodigious on analyst calls and in conferences where they are thrown softballs, is root-canal painful. When it comes to financial performance, what they offer is “I am changing the world. It is beneath me to show profits!” And, that’s why these folks expect the corporation to be an extension of self.

The same way that I do not blame Louis XIV, I do not put the fault entirely on those executives. I squarely blame the assembly of cheerleaders around them, the so-called “enablers.”

It is so unfair for genuine companies to have to work so hard to show consistent net earnings so they can stay in business, considering that flamboyant nonperforming enterprises have much easier access to capital. Exchanges should seriously consider delisting those companies with long and sustained losses. Retirement system members ought to vote out money managers that enable executives capable of losing billions with no qualms.

Aristotle said, “We are what we repeatedly do. Excellence, then, is not an act, but a habit.” Enterprises are excellent only if they have a habit of financial performance recurrently.

Jahan Alamzad is a management consultant. He lives in San Carlos.