Why boards need to take action on power-hungry leaders

Leaders who consolidate power through retaining decision-making rights are willing to sacrifice their organization’s expected earnings in order to retain control.

From Enron and Tyco through to WorldCom and Lehman Brothers, the world’s biggest corporate collapses usually have one thing in common: a centralized organizational structure that concentrated power into the hands of executives who stifled the free flow of information and retained the right to make critical business decisions. In such cases, there was often a whistleblower at a local level who knew something was going horribly wrong – but when they raised the alarm, they were ignored or overruled, and effectively silenced, by those higher up in the organizational food chain.

This kind of behavior on the part of executives can manifest itself in a not inconsiderable number of problems for organizations and their boards. In particular, executives’ desire to maintain control and hoard the “rights” to make…