Personal behavior is fair game: in today's image-conscious and scandal-charged age, CEOs need to keep their quirkiness in check - Reputation - chief executive officers

Chief Executive, The, Dec, 2002 by Meryl Davids Landau

By fall of 1998, Joe Firmage epitomized the Silicon Valley rising star. USWeb, the prominent Internet consulting firm he'd cofounded, was thriving and, as its CEO, Firmage earned millions. All before the age of 30. But that November he declared in a 600-page Web posting that he believed aliens had visited the earth. Less than two months later, his company forced him to resign.

Although Firmage's extraterrestrial sightings are certainly extreme (and ultimately he managed to resurrect his career), his downfall offers a cautionary tale. A chief executive's personal behavior has long been considered fair game, widely seen as reflecting not just on the individual but also on the corporation he or she runs. But today, as one corner office scandal breaks after another, CEOs find themselves under a stronger microscope than ever, both on the job and off.

"Right now there's a crisis of confidence that the business community has in its leadership," observes Susan Battley, a psychologist in Stony Brook, N.Y., who advises chief executives. "All the critical stakeholders are closely watching the CEO's behavior along the entire public-personal spectrum."

Studies show that a company derives at least half its reputation from the standing of its CEO. Corporate boards are more ready to ax a chief executive today than ever before, as nearly two-thirds of major companies churned their chiefs in the past five years.

"You used to have some CEOs who built their power base over many years, and they controlled their boards," explains John Challenger, CEO of the Chicago-based outplacement firm Challenger, Gray & Christmas. "Those big frogs in their ponds could be as idiosyncratic and wild as they wanted. But today there is not as much room for Ahabs to exist."

Corporate chiefs recognize that close scrutiny comes with the job. As Michael Howe, president and CEO of Triarc Restaurant Group, the Fort Lauderdale, Fla.-based franchisor of Arby's fast-food outlets, sees it, CEOs have "credibility capital." You build up the capital with consistent, and controlled, behavior. If you begin to expend it, you lose effectiveness as a CEO, Howe says. Spend too much, as Firmage's experience shows, and it will cost you your job.

Like many chief executives, Howe says he's become more careful about his extracurricular behavior. He watches how much he drinks, and he avoids attending gentlemen's clubs with the boys. "There are certain forms of entertainment that I might have been talked into going to before that now I've consciously drawn the line against," Howe acknowledges, adding: "I have a responsibility to the company to be cognizant of my behavior and the choices I make, 24/7."

Howe also says he's mindful of controlling his mood swings at the office more closely than he did as a lower-ranking executive. "Before, I was more emotional in the way that I approached the business," he says. Now, he tries to be evenhanded. Where he once might have quickly shot down a proposal he disagreed with, today he's more likely to calmly ask the colleague who suggested it to clarify the idea.

Dane Madsen, president and CEO of Las Vegas-based YellowPages.com, agrees. "Employees don't need 'Dad' panicking," he says, stressing that a CEO "needs to deal with adversity and excitement in relatively the same manner." For example, Madsen says, when a top manager comes into his office to announce a $10 million deal, rather than offering shrieks and high-fives, he ooly evaluates the costs and benefits.

Some acts are so egregious it takes only a single incident before the CEO is dismissed. White-collar crime fits into that category, as Tyco International's Dennis Kozlowski and Adelphia's John Rigas, among others, can attest. So does sexual harassment. "It's clear the ethics and ethos of corporate America are that the CEO is gone if he crosses that line," says Nat Stoddard, chairman and CEO of Crenshaw Associates, an executive outplacement firm based in New York. For instance, at a party celebrating the impending merger of his New York law firm, Haythe & Curley, with a major Toronto firm in 1999, Thomas Haythe reportedly harassed several women attorneys. Though he was so important a player that the merged entity was expected to bear his name, Haythe was forced to step down less than a week later. The firm now goes by Tory LLP.

Why would a CEO jeopardize his job with such extreme behavior? Psychologist Steven Berglas, an instructor at UCLA's Anderson School and author of Reclaiming the Fire: How Successful People Overcome Burnout, believes high-profile self-destruction often comes when powerful people have reached all their major objectives. "The psychology of the CEO is to be strong and efficacious," he posits. "If you no longer have that in your job, daring the devil and trying to beat him is the way some try to get excited again."

As cases in point, Berglas cites Alfred Taubman, the former Sotheby's chairman convicted of conspiring to set commission rates on auctioned art, and former President Bill Clinton's dalliances with Monica Lewinsky. Taubman didn't need the money, Bergias points out, and Clinton easily could have chosen a partner who was more likely to be discreet than a 21-year-old intern. (In fact, Berglas predicted two years earlier in an op-ed piece for The Boston Globe that the lame-duck Clinton had "the potential for self-destructiveness.")