Self-delusion will sink Sepp Blatter just as it sank Dick Fuld

Self-belief is vital for leaders but Lehman, Hanergy and Fifa show the dangers
Fifa president Sepp Blatter celebrates after his re-election

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I blame Sebastian Junger. The success of The Perfect Storm, the journalist’s 1997 book about a doomed fishing boat gave embattled corporate titans the perfect metaphor for what went wrong on their watch.

So here is Dick Fuld, former head of Lehman Brothers, in his first voluntary public appearance since its collapse, explaining last week why the bank went down in 2008: “It isn’t just one single thing, it’s all these things taken together: I refer to it as a perfect storm.” And here is Sepp Blatter, Fifa president, as he prepared the way for his re-election at football’s governing body in Switzerland. Last week’s arrests of Fifa officials, he told delegates, “unleashed a real storm”.

Blaming extreme weather is popular with controversial leaders, for good reason. The image of navigating through a tempest conveys personal authority and bravery but also lets them plead helpless innocence of the causes and consequences of what is happening. It is the false-heroic middle way between having to admit you are a fool, who had no idea what was going on, or a knave, who fostered the scandal. Instead, they can look like hard-bitten captains on the bridge, braced against the monstrous waves and wrestling with the wheel, while the elements conspire against them.

These are great days for collectors of leadership brass neck. In China, Li Hejun, chairman of Hanergy, the solar-panel maker, declared last week that talk of an investigation into the company was “purely rumour, there is no such possibility” and said he would be “the first to know if the authorities were really planning a probe”. Hours after Xinhua, China’s official news agency, aired the interview, the Hong Kong watchdog confirmed it was investigating the affairs of Hanergy Thin Film Power, the group’s listed entity, whose soaring share price crashed last month.

These are not necessarily lies. In Hanergy’s case, the Hong Kong investigation may have been covert, and it is not clear exactly when Mr Li recorded his interview. As for Lehman, it is true that no “one single thing” did for the bank. Mr Blatter’s earlier protest that he “cannot monitor everyone all of the time” is a statement of the obvious, familiar to anyone who has ever run a large organisation.

But there is something more corrosive than leaders lying to the outside world and that is leaders deceiving themselves.

Self-belief is a vital part of being an effective leader. Admitting to weakness is taboo. But it is easy for leaders to become overconfident and to start governing just by asserting the facts as they understand them and ignoring others’ legitimate concerns: “Hanergy has never been so good in our history” (Li); “Let this be the turning point” (Blatter).

Mr Fuld has had nearly seven years since the financial crisis to ponder what really happened in 2008. But he is still trying to shape the narrative.

Plenty of chroniclers of the meltdown do believe, like Mr Fuld, that the US government was partly responsible for what occurred. Few would agree, however, that Lehman was a model of prudence, protected, as Mr Fuld put it last week, by “27,000 risk managers” in the form of its stockholding employees. On the contrary, as Bethany McLean and Joe Nocera wrote in All the Devils Are Here, instead of trying to limit exposure to the US housing market between 2006 and 2008, Lehman “decided to double down . . . by financing and investing in big commercial real estate deals”.

Later, Hank Paulson, former US Treasury secretary, told the Lehman bankruptcy examiner that Mr Fuld was “a person who heard only what he wanted to hear”. Such self-delusion also plagues Mr Blatter. It is the signature trait of overreaching leaders and a clear signal of potential disaster ahead.

Compare the Fifa president’s attempt to brazen out the scandal with the way key players reacted in 2001 as Enron imploded. Three weeks after the energy company filed for bankruptcy, but before the extent of the saga of its corruption and self-dealing became clear, Jeff Skilling, former chief executive, talked to the Houston Chronicle. Remember that Skilling, who was later jailed for his role in the affair, had cosigned Enron’s last letter to shareholders, calling it “the right company with the right model at the right time”.

“What brought Enron down?” the reporter asked him. “A perfect storm,” he replied.

andrew.hill@ft.com

Twitter: @andrewtghill

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