The Power Struggle: Part Two

Leadership Power Struggle: Part One | Part Two | Part Three

“The greater the power, the more dangerous the abuse.” -Edmund Burke

A Wicked Garden

In the late 1990s, Jack Grubman had wide-ranging power. A preeminent Wall Street analyst at Salomon Smith Barney, Grubman’s buy ratings and optimistic research helped push telecom stock prices to stratospheric heights. His annual salary was nearly $20 million.

But despite Grubman’s professional power, he lacked the clout necessary to get his twin daughters into an exclusive New York City preschool called the 92^nd Street Y. Fortunately for Grubman, he held influence over people who were even more powerful than he was.

At the time, Salomon Smith Barney was a subsidiary of Citigroup and, as it turns out, Grubman had the power to fix a nagging problem for the banking giant’s top executive. Sandy Weill, Citigroup’s board chair and co-CEO, was in a power struggle with his counterpart, co-CEO John Reed. Legend has it that Weill had solicited help from board member C. Michael Armstrong in ousting Reed and installing Weill as the only CEO.

In addition to sitting on Citigroup’s board, Armstrong was also the CEO of AT&T. For years, Grubman had maintained a neutral rating on AT&T and repeatedly disparaged the company in his analysis and public comments. Armstrong complained to Weill that Grubman’s behavior was affecting AT&T’s stock price and, presumably, his willingness to help him force out Reed. So Weill asked Grubman to “take a fresh look” at AT&T, and on November 29, 1999, Grubman upgraded his opinion on the company from neutral to buy, a double upgrade in the Salomon Smith Barney rating system. As you might have guessed, Citigroup’s board removed Reed three months later.

Subsequently, Weill called a member of the 92^nd Street Y’s board of directors and greased the wheels for Grubman’s kids. After the school admitted the Grubman twins, Weill arranged a $1 million donation to the Y from the Citigroup Foundation.

But the deal making didn’t stop there. In the wake of Grubman’s upgrade of its stock, AT&T selected Salomon Smith Barney as a lead underwriter in its Wireless IPO. It was the largest equity offering ever made in the United States, and Salomon Smith Barney earned $63 million in underwriting fees.

Today, the once mighty Grubman is powerless. For his role in this elaborate scheme, Grubman earned a $15 million fine, and the securities industry barred him for life. Although Weill acknowledged intervening to help Grubman’s twins get into preschool, he disavowed any connection with either their acceptance by the Y or the million-dollar donation.

Power Abusers

While the Citigroup example is extreme, it demonstrates how some leaders abuse their power. Grubman, Weill, and Armstrong abused theirs for personal gain. But power is misused in many other ways.

• Every day, corporate bureaucrats use their power to create rules for employees that foster conformity and deference.
• People in positions of power withhold resources—human and otherwise—that workers need for accomplishing their day-to-day work.
• Micro-managers project their low personal self-esteem onto their employees and, as a result, treat everyone as untrustworthy.
• Highly negative managers bully workers with name-calling, humiliation, or mental and physical abuse.
• Bosses use their positional power to sexually harass their employees.

All these authoritarians believe their positional power confers instant respect.

In other words, too many people with authority confuse the concepts of power and leadership.

What’s Going On Here?

Why is misuse of power so prevalent? Certainly, personality is a large factor. History’s most notorious leaders, monsters likes Hitler, Stalin, and Pol Pot, had dark and shadowy personalities. Positional power provides immoral people with the opportunity to leverage their influence for unethical—indeed evil—purposes.

Another reason why power abuse prevails is that many leaders believe that employees intrinsically find work distasteful and will deliberately avoid it whenever possible—a premise that Douglas McGregor labeled Theory X. These leaders believe that people are inherently lazy and will only work when threatened. Accordingly, they use their positional power to coerce employees to perform.

Along those lines, powerful people often hold destructive stereotypes toward others. When they view subordinates as inferior and incapable, these leaders feel justified in mistreating workers or using them as the means to an end.

Finally, powerful people are often in positions that enable them to protect their power. They attack anyone who challenges their power and, as a result, few people confront them.

As I mentioned in the first installment of this three-part series, power is not innately bad. In fact, when you hold true power—the kind that results from possessing leadership integrity—you can harness it for greatness. And that’s what I’ll discuss next time.

Epilogue

In a quirk of fate, Grubman and his co-conspirators can thank another power abuser for uncovering their ploy: former New York governor Eliot Spitzer, who was the state’s attorney general at the time. Spitzer earned the nickname “Sheriff of Wall Street” by prosecuting countless corrupt corporate titans.

In case you forgot, he resigned amid allegations of his involvement with a high-priced prostitute.

Leadership Power Struggle: Part One | Part Two | Part Three

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George Brymer is the creator of The Leading from the Heart Workshop®
He delivers Leadership Workshops that help leaders at all levels evolve
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