Who Pays for Top Boss’s Thrills?

If you are a thriving chief executive, it falls to shareholders, employees, and customers to pick up this tab. The Wall Street Journal may view this matter primarily through the lens of what happens when CEOs who are natural risk takers endanger not only themselves but their entire organization by continuing to indulge in flying, racing, or other high-adrenaline, higher-insurance premium activities that carry over from more prodigal habits before the given executive rose to the top. (For details, see http://online.wsj.com/article/SB10001424052702303717304577277931099185536.html )

The real questions, from the view of protecting the organization’s equities, are these:

• Is there a point where executive freedom to do as one damn well pleases crosses the line to qualify as a legitimate concern for the organization? Can this penchant for unnecessary, physical risk taking become the proper business of the board of directors and of the whole institution instead of staying a private matter that is only the executive’s business and no one else’s?

• If so, what are the organization’s and CEO’s options for reconciling personal freedom with thrill seeking that puts more than just the chief executive at risk?

• What, if anything, should CEOs and governing boards not do about this matter?

First of all, there is a line that the top executive crosses when his or her sudden loss would be catastrophic to the organization. A startup whose strategy, financing, and advancement rely on an irreplaceable leader puts all the employees and investors at the mercy of the leader who is cavalier about pursuing needless thrills. This leader may find it exhilarating to cheat death, but the workers who face layoffs or shuttering of the business if the leader is incapacitated have their livelihoods right there, in the cockpit of experimental airplane, race car, or deep sea diving apparatus – only they don’t get to experience the adrenaline rush. For them, as for investors, the risk only comes with penalties, not rewards. So, if the chief executive has any sense of obligation to employees or others who are important enough to keep the organization working and thriving, then he or she owes them some consideration before blithely signing up for the next thrill ride.

What of the negative effect that such restraint or thrill reduction imposes on the adventure-seeking executive for whom taking risks is a personal imperative that is indelibly tied to business creativity or performance? In this case, there are alternatives. Both of the main alternatives involve syndicating the risk, which is what insurance companies do when no single entity is able to reimburse the total loss that would occur in any worst-case scenario. Thus, when Lloyd’s of London started insuring ocean-going ships on their passage across the Atlantic from the Old World to the New World and back again, it would rely on a number of different syndicates to pick up some of the expense that, in the aggregate, would represent the total cost of making good on a claim. Naturally, these syndicates also shared in the profits, splitting up premiums accordingly when the same ocean trips took place without incident. How do executive and governing body arrive at a syndication of the risk arising out of thrill-seeking that the executive refuses to give up? One way is through insurance for key officers of the organization. Executives quickly find that the more elective risks they take and the more indispensable they are to the enterprise, the higher their premiums will be. The board of directors can disincentivize such executives from overdoing risk taking by refusing to pay the difference in premiums between what it costs for a thrill seeker and what the insurance company charges for a more prudent executive officer. Money alone seldom compensates fully for loss of an irreplaceable leader, however. What, then, is the other form of risk syndication that needs to happen?

Take strategic measures to make the thrill chaser less indispensable. Such measures include succession planning and active diffusion of responsibilities so that the organization can and does function regularly without the star leader. Properly instituted, such measures offer the leader in question a means to ease the burden of carrying the organization around the neck as a millstone. Encourage the chief executive to take frequent vacations and to grow the next generation of leaders by leaving others in charge. Eventually, the organization will develop the capacity to function without the one single executive, to the relief of investors, employees, customers, and the executive as well.

What not to do? Turning the debate on thrill-seeking executives into an epic battle between board and CEO and waging war in the media constitute a recipe for disaster. This is a business challenge, like any other issue that keeps the operation running. Accordingly, it deserves sober, analytical discussion and weighing of options. The executive’s value to the organization is an asset which the organization has a right to protect. Similarly, the executive’s personal freedom and idiosyncratic attachment to risk-taking behaviors may well be so ingrained as to be an inseparable component of that executive’s secret of success. Failing to acknowledge each other’s views and letting emotions lead to a clash of the titans represents institutional malpractice on the part of all concerned. Instead, the best approach is to enter into a business discussion about how to safeguard everyone’s business assets. This turns needless risk into calculated risk.

– Nick Catrantzos

Socially Sanctioned Chicanery

How could a television channel ostensibly dedicated to reassuring bromides about family and home promote crooks, when its executives should know better? Look no further than TLC’s program, Extreme Couponing, for an answer and a sign of the times.

Here is a case in point. In 2011, an episode of the show featured a minor using counterfeit coupons to acquire, free of charge, over 400 rolls of toilet paper. The store featured in the show as cashing the coupons for the minor experienced a rude awakening when Quilted Northern refused to pay for the phony coupons. Ultimately, the mother of the minor in the show ended up repaying the store for all the items that the youngster had “bought” in a display of alleged finesse with making frugal use of coupons. TLC, however, thought little of setting the record straight or of taking positive action to dissuade – or even acknowledge – such fraud. A coupon industry watchdog known for defending against fraud offered TLC free expertise to assist show producers with avoiding such fiascoes, but TLC staff ignored multiple offers. Details are available on this page of the Coupon Information Corporation’s web site, http://www.couponinformationcenter.com/extremecoupon.php , and at http://moneyland.time.com/2012/02/20/are-the-money-saving-strategies-on-extreme-couponing-bogus/]

Meanwhile, TLC continues to foster questionable practices like the foregoing by unabatedly chanting the kind of fraud-promoting hymn that any con-artist would love:


“Extreme Couponing follows savvy shoppers as they plan and plot their way to unbelievable savings. Witness amazing shopping skills and shocking stockpiles of merchandise, as everyday people go to extremes in pursuit of extraordinary deals.”
[Details are at http://tlc.howstuffworks.com/tv/extreme-couponing ]

Under the circumstances, it should come as small surprise that TLC even stages some of the ostensibly real interchanges between its coupon-slinging protagonists and fellow shoppers who end up being production company stooges expressing emotions on cue. [Details are at http://www.chicagotribune.com/business/sc-cons-0421-frugalista-coupon-fraud-20110426,0,2329448.story ] Another coupon aficionado, drawing the line at illegal activity, points out how one of the featured TLC show’s stars was consistently using coupons issued for more expensive products on cheaper products, thereby getting away with an artificial discount that exploits a flaw in some coupon handling systems. [Details are at http://savingmoneyplan.com/ethics-extreme-couponing-readers-spot-problems/ ]

More searches along these lines reveal that some stores featured on the show violate their own protocols by doubling or tripling the value of coupons – only as long as the Extreme Couponing cameras are filming. When regular patrons ask about the practice, the stores’ managers refuse to double any other coupons, claiming that the TLC show represented a special, one-time promotion.

What messages do TLC and programs like Extreme Couponing convey?

• Cheating is OK if it makes you look good.
• Faking “reality” is acceptable if it fulfills other, promotional goals.
• Boorish behavior attains social acceptability if it can be shown to turn a profit.

What are the latent lessons worth mining out of this mess?

• Anything that looks too good to be true is too good to be true, whether in dating, international diplomacy, or coupon exploitation.
• Reality shows, lacking the benefit of worthy script, plot, or character, exist by highlighting extremes. The more reprehensible, the more eye-catching.
• Nothing is more communicable than bad taste. This does not, however, turn the stench of fraud into the perfume of legitimate achievement.

No wonder TLC has abandoned its original full name, The Learning Channel, in favor of its three-letter, current identity of TLC. There is no learning to boast of in programs such as Extreme Couponing. Try Losing Customers may become the way this network is remembered by future generations.

– Nick Catrantzos