Puerto Rico's Rick Perry
The ideal of a CEO is perhaps embodied by Steve Jobs, a genuine leader who returns to a company, overhauls its entire outlook and infrastructure to produce new goods and service that provide genuine value for the consumer and, ultimately, lead to their momentous demand in the marketplace. Apple, who nearly went bankrupt in 1997, now has more cash on hand than the US Federal government. It has expanded stores throughout the US, Europe and even, dare I say, China. The exponential ascendancy of his vision and policy was only halted due to his sudden demise from pancreatic cancer, albeit not unexpected. Jobs returned to Apple in 1997 and lasted as CEO until his recent death (2011). It goes without saying that his unusual 14 year reign--most CEO's last only 6 years or less--was undoubtedly due to the unique vision and success, both technological and financial, for the company in one of the most demanding marketplaces. (The computer industry is ruinous for its low margins of profitability).
Let us compare his case with that of the CEO of another company.
This other CEO has held onto his position for an even longer amount of time. It is actually hard to pinpoint the actual initiation of his reign over the company, given that he has been assigned or reassigns himself leading positions since his first entry into it. In 1979, for example, this person served as an "Executive Vice-President", of a 'Board' that assisted the Board of Directors on 'strategies' and company 'policies'. (This was highly unusual given that such is the Board of Director's actual role in the first place.) He eventually became part of the formal executive team by 1984, and still holds a CEO position in the company to this day. These known dates give an approximate tenure of around 32 years, give or take a few years. Although we have not been able to determine this CEO's actual annual income during the entire time period, reports of 2005 placed it hovering at around $1 million, or a total of about $ 29,000,000. This is not bad if we consider that Steve Jobs was paid only one dollar ($1) for his annual salary during his 14 year tenure--what might be termed the true test of a CEO. (If the CEO will truly builds the value of a company, he should only be paid in stocks, making or loosing on the basis of his actual performance.)
One would think that this CEO, with a tenure that is DOUBLE that of Steve Jobs, which itself was three times the norm--or what would amount to six times the norm for our CEO--is either a genius or a visionary who has led the company into new ventures with great potential value, or to a enormous amount of legitimate profitability. In fact, the company's stock, which approached $20 in the 1990s, is now worth only around $1.90, is struggling to stay afloat with some amount of respectability. This CEO during the last 2 decades tried to expand the company into other national markets, with the deregulation and privatization that occurred in multiple economic sectors during the 1990s. It goes without saying that his effort at expansion were a failure, forcing the company to enter into a costly retraction from those prior futile expenditures. Given that his master's thesis of 1977 was written with the assistance of a second party--something hard to fathom for a master's thesis at an Ivy League school--we may safely put away the notion that his longevity has been solely due to his brilliance. The light shines darkly in some quarters.
Who am I alluding to? Richard Carrion, Banco Popular's principal CEO. Like Rick Perry, the gaffes committed by Carrion are atrocious not only in their scale but in their magnitude.
Mr. Carrion has repeatedly made a public call to 'bring Puerto Rico into the 21st century', suggesting a 'turn to modernity' without having a clue as to how anomalous his own personal standing in the Banco Popular is in todays' business world. Carrion appears to be 'ruling' the company as if he were its own monarch, accountable to nobody except himself. Far from abiding from contemporary qualifications to "produce or perish", Mr. Carrion has held onto his position merely because of his title to 'ancestry'--a practice of hereditary titleship that was common during the medieval period. Both his grandfather and father were CEO's of the company, and 'junior' appears to only have kept the seat of the throne warm.
What is even worse is that, not having passed through the usual rigors of the corporate landscape and the hoops of institutional ascendance, Mr. Carrion's actions in one of Puerto Rico's largest economic institutions influences a vast array of other activities in our relatively-small island society. Like a foul drain that empties into a main river and eventually into a large lake, Mr. Carrion's activities 'contaminate' all else beneath him. Since no meritocracy actually led to his actual position in the first place, Mr. Carrion does not promote meritocracy in the island, either by fiat or by example. No matter how many hours are claimed that Mr. Carrion actually works, the fact that he has not actually earned the right to his positions means that all else under him also do not see the need to earn their own position in the corporate infrastructure through hard work and merit. Gross unethical behavior, according to some who previously worked there, is more rife than one would care to imagine.
One could counter the allegations just made by arguing that, if Carrion is so poor a CEO, how is it that the Banco Popular has been able to stay afloat all these years, managing to maintain its role in the financial markets? The answer, as any physicist will know, is simple: network dynamics.
Economies are not created equal, and there are 'streams' and 'forces' which greatly influence the success or failure of particular companies, independently of the validity of decisions or the magnitude of effort made at the corporate level. If a company fortunately happens to have placed itself in a 'positive stream', economic 'currents' will invisibly push this company to economic predominance, while at the same time keeping rivals in a submerged or in an incapacitated position. Take, for example, the VHS
and the Betamax. VHS, a tape based system for storing audio, was the first to arrive at the scene. Although Betamax was a superior technological design, because it had a later entry into society, meant that it had to fight the 'upstream' of all the other goods and services that had already been built around the VHS: video movie rentals, and the many VHS that flooded the household market at a low price. It was obviously not that the design of the Betamax was 'bad', but rather that it was just...'late'. Blame it all on the role of networks.
Similarly, Banco Popular had already reached an important 'tipping point' number of bank branches PRIOR to Carrion's formal entry as CEO, mainly under the leadership of his father, Rafael Carrion. Between 1934 and 1975, the number of branches steadily increased to 59, jumping to 103 only three years later. This was roughly half the total number of all bank branches in the island, be it of local, US, or European ownership. Perhaps even more importantly, the quantity of deposits between 1960 and 1973 jumped from around $100 M to $800 M, a eight fold increase in only 13 years. Yet, only three years after that, it scaled twenty fold (20X) to an amazing $2.045 billion. That Banco Popular had established branches throughout the island by 1978, with the greatest concentration where it counted the most (San Juan), meant that its future was basically 'guaranteed' as a result of network dynamics. A user would be allowed access to his funds no matter where he travelled throughout the island, thus facilitating his or her ordinary activities whatever these might be and stimulating others to join the same network as a result of its 'externalities'.
We may thus state the case that Richard Carrion and Steve Jobs as CEO polar opposites. Steve Jobs, originally from a humble family, through technological acumen and business savvy, was able to restore a computer company against enormous odds. This is an understatement that cannot be emphasized enough. The only company that was favored in the economic stream at the time was Windows, and it is against this behemoth that Apple was 'fighting', and winning, as a result of genuine technological innovation. Carrion on the other hand, an individual who accidentally happened to be the grandson of the principal founder, and a person who never actually undertook his graduate school training, and who entered into a preexisting infrastructure that was already destined towards economic hegemony a decade prior to his actually entry into the company. Telephone books of the 1960's reveal that while all other Puerto Rican banks had some 20+ telephone listings, Banco Popular's figure stood at 160+. Carrion's 'success' as a CEO was principally the result of 'good luck'--not exactly the most reassuring thought for any investor.
Yet the most surprising question of all is why the Banco Popular's stockholders haven't taken a stronger voice in its affairs. It is as if Rick Perry had actually won the US Presidency and had ruled over three decades--instead of being ruled out as he recently has been. It is enough to send a shudder down anyone's spine. Well, that is exactly what happened in Banco Popular during the last three decaades: a joker was placed as king.
Oops.