How to Stop Radical C.E.O.s From Going Rogue

Corporate bosses are an uncomfortable hybrid of chief and executive. They are paid and honored like royalty, but are expected to follow the same rules and show the same restraint as every other employee. Type-A behavior often enhances the chief side of the job, but is always an imperfect fit with good conduct.

Companies have four lines of defense to avoid Mr. Ghosn-style debacles. Each of them needs to be kept strong.

The first is bureaucracy. Like all of their underlings, chief executives are expected to subject their decisions to committees and submit to audit trails and standard rules of conduct. These systems never work perfectly, but without them there would be far more tales of Type-A bosses suffering from the ethical equivalent of cardiac arrest. Still, additional bureaucratic checks — say regular personalized audits and a direct line between whistle-blowers and the board of directors — might be even more effective.

The board is the second firewall. Powerful bosses all too often choose directors who are Type-B weaklings and give them a free hand. Without genuine discipline from strong, cautious types, though, the boss’s lack of restraint is all too likely to wander into inappropriate pursuits. A special committee to supervise the chief executive, made up of truly independent directors, could help.

Third comes the conscience of the boss. Successful Type-A people are usually very persuasive, and can usually persuade themselves that, say, very high salaries do not provide an adequate reward for their exceptional contributions. It is hard to stimulate helpful self-doubt, but mandatory spiritual retreats are worth a try. Or perhaps, like absolute monarchs of the past, bosses need court jesters with a license to tell the chief executive some hard truths.

Finally, there is punishment. Fear can helpfully concentrate otherwise unwilling minds. Imprisoning, impoverishing and shaming one or two bosses will not discourage many egomaniacs. Their confidence that they should be judged by different standards is remarkably hard to shake. However, as chief executive pay has risen, punishment has declined. Both trends make moral errors more likely.

The common theme in all of these defenses is disbelief. If underlings, directors, shareholders and prosecutors did not think that the big boss walked on water, professionally speaking, then bad behavior would be less tolerated. Then future cost killers and company builders would be less likely to also destroy their souls.