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Michael Izza, the CEO of The Chartered Institute of Accountants in England and Wales (ICAEW), spoke with Martin Noakes on leadership in the context of the credit crunch who asked him the following questions:

Michael, the ICAEW’s mantra is “inspiring confidence in business” so I know you will have some interesting views on the subject.

Will the CEO’s job change after the dust has settled?

Michael: The first thing to say is that the crisis is not fixed just because Governments around the world have stepped in. When the dust does settle the long-term impact of the current economic situation will be wide reaching and long lasting.

In particular I think CEOs across the financial services sector will need to rethink their attitude towards risk as something that needs to be gripped strategically rather than just managed as part of the governance process. A major concern for me is that the bail out, necessary though is has been, sends a message to the market that certain Institutions are just too big and interdependent to be allowed to fail. What CEO under these conditions would not take a risk knowing that the tax payer will ultimately bail them out?

Ethics
I think we are going to see a tectonic shift in the way an organization is viewed by its stakeholders. Trust has been damaged and the popular media are baying for blood. The CEO of tomorrow will need to infuse a culture of absolute probity and deep rooted accountability. In my mind a stronger link will need to be fostered between executive remuneration and long-term shareholder return. New metrics such as ‘externalities’ will also become standard (e.g. the effect on the environment, CSR and extended stakeholder confidence – do my customers and suppliers really want to keep doing business with me?)

Confidence
It sounds obvious but when I talk to Government ministers, policy makers as well as wider market participants there are real concerns about leadership and the ability of the CEO to communicate and inspire. For sure, there is going to be a regulatory response to the crisis but building trust, especially across international boarders is going to be just as important as working within new governance frameworks. Leadership will be tested in the current climate in far more exacting ways than when the market is booming – this period will show us just who the great leaders really are (and they probably won’t be the obvious ones).

Fundamentals
Leadership is also about not being swayed in choppier waters. Let’s not forget the things that were important just a few days and weeks ago. Global warming, clean tech, as well as how best to remain competitive and be true to our vision and corporate goals. These issues are still as important and need our constant attention as part of the long term ‘survive and prosper’ strategy. This is certainly a defining moment however and some of the fundamental principles of running big business may be challenged. Take the system of ‘fair value’ for a business or an asset for example. Could this be replaced with a ‘management judgment’ philosophy? Perhaps so, provided that there is confidence in the personal ethics and integrity of the CEO – we should not forget the lessons of Enron

Good leaders will always be available to industry and commerce – its just that the game is changing!