The life and death of a company – depends on the CEO


1. Raising a Problem

In a rapidly changing competitive environment, companies must always overcome their fate. In this paper, we will discuss the role of CEOs in the rise and fall of companies, and discuss social constraints before finding ways to produce competent managers in the future. This is because my basic view is that it is difficult to hope that the excellence of the CEO will be exhibited without improving the institutional environment.
Therefore, in the new era, the CEO is summarized in several questions to discuss what roles, functions, and responsibilities are required.
First, why is the role of the CEO important in the life and death of a company?
Second, why is it difficult to find a role model of a CEO in Korea? Is it a matter of the individual dimension? Is it a matter of institutional environment? How should this be resolved?
Third, what are the roles and responsibilities of CEOs desirable in the new era?

2. Life and death of a company and its chief executive officer

The CEO plays a decisive role in the company’s life and death by leading the strategic management decision-making process that profoundly affects the company’s short- and long-term management performance under high uncertainty and risk burden. Barnard said that managers should set organizational goals, maintain members’ willingness to cooperate, and create smooth communication conditions. Mintzberg also divided the roles of managers into interpersonal roles, informational roles, and decision-making roles. In addition, according to Kotter’s study, the CEO forms a network centered on him/her and acquires information, and performs his/her duties through network building. With a large number of information, the company identifies the problems to be solved and sets the agenda for decision-making. In this process, the conceptual ability of managers is very important. Managers make decisive decisions at some point, but it is necessary to maintain a certain pattern of decision-making without losing long-term direction in the daily decision-making process.
When making decisions now based on a variety of information, the CEO simulates based on all the “number of cases” that can result, and then his or her own decision-making ability becomes the ability to acquire information, simulate, evaluate alternatives, and select optimal alternatives. In this process, the evaluation and choice of alternatives differ depending on what the CEO’s dominant logic is and what mental framework he has.
The important point here is that the network established by the CEO plays a decisive role in obtaining information. This is because most of the information required for strategic decision-making is undocumented and is obtained directly from key stakeholders. In particular, in a society with high information closure such as Korea, it is difficult to obtain high-quality information without one’s own network.
Another factor is the process of interpreting the information obtained by the CEO and reflecting it in decision-making. Even with the same information, the interpretation of the decision-maker induces the behavior of a completely different company. Environmental awareness tends to be very subjective because the interpretation of such information depends on differences in the level of knowledge accumulated by decision-makers, experience, philosophy, values, and aspirations. Overall, the fundamental logic and worldview of the CEO play a decisive role in the perception and definition of the problem.
Recently, while many companies are pursuing strategic transformation, the importance of the strategic role of CEOs with strong leadership is newly recognized. This is believed to be due to the perception that decision-making uncertainty is higher and interests are more complex than before, and the strategic leadership of the CEO required in this situation is being socially reevaluated.
In this situation, some say that strong leadership that only owners can exercise plays a positive role in corporate transformation. However, the increase in management complexity and expertise is a factor that makes it difficult to dominate management by owned managers. A competent CEO is a valuable resource for corporate development and social development because the strategic role of a CEO, whether owned or professional, plays a decisive role in the fate of a company. Therefore, from the perspective of society as a whole, it is thought that the direction should be adjusted to social development and institutional improvement so that competent CEOs can be produced.

3. Chief Executive’s Dilemma

Why is it difficult to find an outstanding CEO who can be a role model in our society?
First, the management development process that can develop basic qualities as a CEO is weak. Second, there is a problem with the selection mechanism until becoming a CEO. Third, there are many social constraints that are difficult to exert as a CEO.

From these results, it can be pointed out that the speed of internal management and management enhancement was slower than the speed of external growth. Just as the government and companies adhere to each other in a market with inherent unethical and irrationality, ownership and employment managers tend to form a bond. It is difficult to move between companies due to mutual commitment beyond psychological contractual relationships. Therefore, when the sense of complacency through mutual adaptation is fixed, it forms a vested power and resists change. In this climate, it was difficult for managers as professionals to be fostered or demonstrated their abilities, whether they were ownership managers or employment managers in the true sense.

The dilemma that CEOs have faced in Korea can be found in their position as a middleman between the market and the organization. The leader of a company is a person who stands in the middle of the market and the organization. In the market, the logic of competition works and uses various methods to win the competition. When the market climate does not respect reasonable laws and rules, the leader is in agony.
On the contrary, the logic of the community takes precedence in organizations. There is a logic of competition within the organization, but competition that destroys cooperation hinders the organization’s performance. The logic of competition takes precedence in the market, but cooperation as an industrial community is needed in a broader sense. The dilemma that leaders have is how to harmonize the two contradictory elements, the harmony of competition and cooperation.
When the social structure has many contradictions and unreasonable elements, corporate leaders adapt to this climate for the survival of the organization. Therefore, unfairness and illegal elements get involved in the leader’s life.

In order to solve this dilemma, first, it is necessary to minimize the influence of political power on corporate management. From this point of view, the current government’s direction that democracy and market economy should be developed in parallel through eradication of political and economic collusion is very valid.
However, as the government’s intervention increases in the process of overcoming the economic crisis, it has not escaped the dilemma of the authoritarian government. Recently, the political influence on the economy has rather increased. Therefore, the government should ease the degree of intervention and involvement through self-control and reform, and the intervention should thoroughly increase fairness so that corporate managers can escape the “prisoner’s predicament.”
Second, a change in corporate governance is needed. Under the current multi-layered governance structure centered on single-person heads, it is difficult to establish a CEO as an expert. Since ownership managers arbitrarily exercise shareholder rights and management rights and govern the company, no actual management rights of professional managers are given. Since it is not guaranteed to serve a term or position, it is easy to stick to the role of managing a company according to the will of the owner-manager. Therefore, responsibilities and authority should be clarified through the improvement of governance structure, and appropriate evaluation and compensation should be made. It is necessary to revitalize M&A through the formation of a corporate control market. The management market has also been formed, and the selection function of competent management should be activated
C. Third, transparency in management should be increased. The climate of commerce by honesty and trust must be established. The evaluation function by the input/output calculation should be operated and the function as a system should be operated. In addition, a market mechanism for competition must work. Non-market factors that determine a company’s management performance should be minimized. The level of fairness within the organization should be raised. Factors influencing blood ties, delays, and school ties should be alleviated.

4. Desirable CEO conditions in the new era

Korean companies need more fundamental self-innovation activities not only to overcome the current crisis but also to develop into companies with world-class competitiveness in the future. Therefore, managers in the new era must have the ability to lead continuous organizational self-innovation. This requires a CEO with a clear philosophy and values for innovation and a methodology and will to put it into practice. Managers who have the ability to adjust and resolve the changes in power relations and interests that occur in the process of promoting innovation should be found, and they should be empowered to exercise their abilities. Looking at this in detail, it can be summarized as vision management, trust management, and knowledge management.

1) Vision management

Future companies need CEOs who can present the right vision and practice it. In addition, in order to continuously promote management innovation, it is necessary to present and share a vision. In order to minimize the resistance faced in the management innovation process and induce active participation of members, it is necessary to present a new vision for the future and spread a consensus on it. Currently, many companies are experiencing rapid restructuring, collapsing their community corporate culture, and feeling disappointed and despondent about the vision they presented in the past. In order to overcome this, the subject who leads the innovation must firmly establish a new vision on its own.
The right vision inspires organizational members to be able to do it (empowerment). Vision enables motivation, empowerment, and ability cultivation. The result of empowerment is self-leadership. It can stimulate tolerance for failure and a spirit of challenge.