Assessing Their Own Leadership

Giants of Business, Finance Speak Critically At Yale

Friday turned out to be a rough day for Chengyu Fu, CEO of the China Petrochemical Corp., but he showed leadership under unexpected pressure.

Through a video hookup from China, Fu participated in a panel discussion about "CEOs in the Public Spotlight" at the Yale School of Management in New Haven, along with the heads of PepsiCo and Time Warner. That was pleasant enough. But in the middle of the session — late evening his time, mid-morning in Connecticut — news broke that Chinese authorities would sanction Fu for the company's role in a November pipeline explosion that killed 62 and injured more than 100.

The moderator, Jeffrey Sonnenfeld, senior associate dean at the school of management, flashed the news report on a screen and asked Fu whether there was anything he'd have done differently — after sending a private email warning the question was coming.

No, Fu said, there wasn't, but there was plenty left to do.

"We are publicly making apologies again," a stone-faced Fu, who is close to the new Chinese president, told the crowd at the brand-new school building's largest lecture hall. "What we can do is continue to support the community, the families in that tragedy."

After collecting insurance and dealing with immediate remediation, he added, "We need to review all our operations in different cities," with an eye toward careful stewardship in the "growing needs of urbanization."

Sonnenfeld, a professor at the school and one of the nation's leading experts on CEO culture, didn't expect a real-time example of a company head in harsh light. But the uncomfortable situation for Chengyu Fu was one of many examples throughout Friday's daylong conference in which giants in the world of business and finance reckoned with the pressures they face and, more broadly, the vast disconnect between average Americans and the power elite of Wall Street and corporate boardrooms.

With that disconnect as a constant backdrop in a separate panel, six of the most powerful people in finance and regulation talked about "The Future of the Global Financial System," with reforms that may or may not improve public perceptions, and may or may not ease the next Wall Street meltdown.

"If you're going to have support for trade normalization and economic reforms," said Robert Rubin, the former U.S. Treasury secretary who has held top posts at CitiGroup and Goldman Sachs, "the predominance of the population has to believe that these policies are working for them."

Rubin was the only panelist who mentioned income inequality directly as a long-term economic crisis, but others — including the legendary former Federal Reserve Chairman Paul Volcker and Sheila Bair, former chairman of the Federal Deposit Insurance Corp., still a leading voice in banking regulation — later agreed it's a huge issue with no clear policy levers to fix it.

The discussions Friday were part of a three-day celebration of the opening of the school of management's new $243 million Edward P. Evans Hall — a glass shrine to advanced thinking about markets.

Obviously, this is a bunch that's comfortable, several of them easily in the Top 1 Percent, and it might seem disingenuous to hear them decry the state of faith in a financial system that they have shaped. But as Jeffrey Garten, Yale School of Management professor and former dean, pointed out after leading the discussion on the global financial system, "These are all financial people and none of these are defending the art of making money for its own sake."

That's a fair defense, and in fact Volcker, whose "Volcker Rule" limiting Wall Street investment bank speculation helped define the post-meltdown reforms, decried excessive financial profits.

"You can't have an economy in which Wall Street is coming up with 40 percent of the profits of the whole country… We've got to get back to something that's a little more connected with the real world," Volcker said. "There's much more acceptance of regulation than there was."

But not enough contrition. "Those largest financial institutions have done a poor job in trying to win back some of the support from the public," said Roger Altman, a former deputy Treasury secretary and founder of Evercore, a corporate finance advisory firm. "They've done a poor job apologizing."

I guess we need to look to Fu and other Chinese executives for that.

And these global financial leaders also lack faith that added regulations can stave off the next crisis, not because they oppose tighter rules but because they understand that details matter, and we don't know where the next crisis is coming from.

"The best thing to do is to improve financial education," said Robert Zoellick, the former World Bank president.

And for Indra Nooyi, the PepsiCo. chairman and CEO, consumer education matters, too. That was her defense when a Yale professor put her on the spot by asking how the company can claim corporate responsibility when it sells junk food and sugar-laden drinks, many aimed at children.

Nooyi's answer against a charge that's basically impossible to refute was yet another example of the day's main theme, "leadership in an increasingly complex world."

"You're asking me a question but you're abdicating your responsibility as a parent," Nooyi said. "All that we're offering is a choice. We don't want to tell you what to eat and what not to eat. …There's a time of the day for fun products, there's a time of the day for good-for-you products.

"You educate your child … and together we'll make music."

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