From Genghis Khan to Gadaffi and from Stalin to Kim Jong-Il, dictatorship is a style of political leadership that refuses to die out. But are dictators so far removed from today’s business leaders? Matt McAllister reports
Most people agree that dictatorship is a poor leadership model – including dictators themselves, who usually resist the label. Brutal, repressive and kleptocratic, this leadership style seems a world away from the world of modern business.
But is it? Alastair Smith, professor of politics at New York University and co-author of The Dictator’s Handbook, argues that political leaders and business leaders have many similarities – including the fact that some are power-hungry tyrants.
“Political and business leaders both want to stay at the top of their organisations and reward supporters who keep them in power,” he says. “In both cases how they maintain loyalty depends on the structure of their organisation.”
Smith says that just as democratic political leaders and those who head up partnerships or co-operatives have much in common (they both have to keep a large number of people happy, they both need to make the organisation benefit everyone), so do dictators and powerful, self-centric business leaders who operate in weak organisations.
A lack of accountability is one trait shared by personalist dictators and toxic business leaders.
“Heads of large public companies are accountable to relatively few people,” Smith argues. “They can keep their jobs by keeping a few senior managers, influential board members and large institutional investors happy. Although in principle shareholders can depose the CEO and board, just like the people in non-democracies, coordinating their efforts is difficult. As with political revolution, deposition by shareholder revolt is rare.”
Just say yes
One way that dictator-style business leaders can stop dissent is by surrounding themselves with people that are likely to agree with them – even if that means replacing the board with ‘yes’ men and women.
Smith points to the example of Hewlett Packard as a company that engaged in this behaviour. Former CEO Carly Fiorina found that a number of board members, who were ex-HP employees or relatives of the founders, could prove tricky for her: she was worried they could force her out if she didn’t meet their expectations. And so Smith says she worked to shrink the board and bring more “loyalists” on board, with board members paid well to make up for the poor performance of the company.
Narcissists are terrible managers. They resist accepting suggestions, thinking it will make them appear weak, and they don’t believe that others have anything useful to tell them.
Natasha Ezrow, co-author of Dictators and Dictatorships: Understanding Authoritarian Regimes and Their Leaders, argues that this is exactly how dictators operate. “The dictator does everything he can to eliminate potential rivals by deliberately weakening the military to prevent coups and weakening his own political party,” she explains. “The legislature and judicial branches are also weakened or eliminated completely. The bureaucracy is purposely weakened so that it barely functions. The dictator prefers disorganised chaos to dealing with a host of organised potential challengers.”
Since there are so few checks on their power, this can make dictators believe they are “above the law”, Ezrow continues – which often results in kleptocratic behaviour. The weaker the checks of accountability on the leader are, the more the leader is likely to steal.
In the business world, this kleptocratic behaviour can manifest itself in the form of corporate fraud. In recent years, this has been seen with Tyco International, WorldCom, Bernie Madoff's Investment Securities and Enron, where the chief executives of corporates engaged in fraudulent accounting – or overt theft.
However, Smith argues that unlike dictators, who often loot their country’s resources from the start, CEOs of toxic companies usually only resort to stealing when the business begins to fall apart.
“Fraud starts when CEOs don’t want to release information that would jeopodise their control, and so they tell a few white lies,” Smith says. “If conditions deteriorate further, CEOs can find themselves having to stretch the truth even further until they are telling outright lies. As the collapse becomes inevitable then CEOs loot their companies. This was the story at Enron.”
Bad business leaders and dictators suffer from another human weakness: narcissism.
In the latter case, this can be seen in the elaborate busts, paintings and palaces found in the regimes of Saddam Hussein, Gadaffi and Saparmurat Niyazov of Turkmenistan (the latter declared himself “the Leader of all Turkmen”, renamed towns, airports and schools after himself, and even renamed September to match the title of one of his books).
“Once a dictator has personalised power into his own hands to such a degree for many years, decades of being surrounded by sycophants reporting falsehoods and telling the dictator what he wants to hear can lead to narcissistic and delusional behavior,” says Ezrow. “This was exemplified by the cases of Gaddafi and Hussein. The longer they were in power, the more they believed they were one with the state.”
In his book What the Dog Saw and Other Adventures, Malcolm Gladwell argues that narcissism can also be an acute problem in management and business leadership. Drawing on research from psychologists, Gladwell says that the energy and self-confidence of narcissists help them climb up the corporate ladder – and his words echo that of Ezrow.
“Narcissists are terrible managers,” he says. “They resist accepting suggestions, thinking it will make them appear weak, and they don’t believe that others have anything useful to tell them.”
Gladwell says that this was a key flaw of Enron’s business model, where senior managers were given too much autonomy and individual “star power” was prioritised above teamwork and compliance. These management “stars” were essentially straight out of the dictator school of leadership: there were few checks on their decisions, they worked for themselves rather than the benefit of the organisation and a personality cult developed around them.
“Enron was the Narcissistic Corporation – a company that took more credit for success than legitimate, that did not acknowledge responsibility for its failures, that shrewdly sold the rest of us on its genius, and that substituted self-nomination for disciplined management,” says Gladwell. His words could easily be applied to a dictatorship regime.
It perhaps goes without saying that this style of leadership is extremely damaging to both states and organisations – often leading to both their eventual collapse and the exit of the leader.
“Personalist dictators are self-destructive,” says Ezrow. “They harm their own regimes or organisations to gain more personal power. These regimes have no benefits and are usually complete failures.”
So bearing this in mind, why has dictatorship-style leadership persisted so long in both politics and business?
“It persists because it’s good for leaders,” says Smith. “Having struggled long and hard to retain power, leaders want to keep it.”
The Dictator’s Handbook: Why Bad Behaviour is Always Good Politics by Alastair Smith and Bruce Bueno de Mesquita (PublicAffairs) and Dictators and Dictatorships: Understanding Authoritarian Regimes and Their Leaders (Continuum) by Natasha M. Ezrow and Erica Frantz are out now.