“I hear nothing, I see nothing, I know nothing!”

Amit’s note: I wrote this post a few weeks ago, but didn’t put it up. Not only is it still very relevant, but it is also current, since two of James Murdoch’s former staff recently gave testimony that he was wrong to claim, as he did, that he heard nothing, saw nothing and knew nothing.

By now, most news-aware people worldwide know of the sordid tale of corporate, police and political corruption unfolding in Britain. Lost from its main storyline, however, is a key issue raised by the questioning of Rupert and James Murdoch by a select committee of the British Parliament: the total abrogation of leadership at News Corp. (I’ve seen only one passing mention of this issue in the media; ironically enough it was on The Colbert Report news comedy show.)

I disagree strongly with Mr. Rupert Murdoch’s politics. However, until now, I couldn’t help admiring him for his entrepreneurial abilities. After all, he emerged from a nation with fewer people than some of the world’s largest cities and built a powerful global media empire with the power to shape governments.

Yet, there he was, responding to the question “Do you accept that ultimately you are responsible for this whole fiasco?” with “No.” Asked if he had considered resigning, he replied, “No, because I feel that the people I trusted, I don’t know at what level, let me down and I think they behaved disgracefully, betrayed the company and me, and it’s for them to pay.” He then claimed, “… frankly, I’m the best person to clear this up.”

In Hogan’s Heroes, the old American TV sitcom about a German POW camp during World War II, the inept Sergeant Schultz regularly mouthed his signature line – “I hear nothing, I see nothing, I know nothing!” These words have long become a part of America’s idiomatic language. In the few moments during which he spoke the words in the prior paragraph, Rupert Murdoch brought to my mind the image of Sergeant Schultz. Nor did James Murdoch’s testimony erase that image.

Luckily for the two, the panelists didn’t focus their questioning on the nature of a CEO’s job. Had they done so, they could have asked Rupert Murdoch (or James Murdoch or Ms. Rebekah Brooks) some very tough – and extremely important – questions that go to the heart of the failure of leadership:

“Experts on leadership say that great CEOs expend enormous effort on crafting their companies’ cultures. Should we conclude that over the decades during which you built News Corp from ground up, you couldn’t instill in it a culture in which anyone who even raised the possibility of hacking a kidnapped teenager’s phone would have been summarily fired? Or should we conclude that you deliberately didn’t craft such a culture?”

“Another key responsibility of a CEO is building a senior executive team. Indeed, some experts say a CEO should never delegate this task. You hired each senior executive of News Corp personally, did you not? Several are under investigation and some – like Ms. Brooks – have been arrested. How did you make so many mistakes? Where did your thinking or judgment go wrong?”

“You believe that the people you hired, including your son and Ms. Brooks, did no wrong. Since someone obviously did, if we accept your logic, we must conclude that your appointees at least made some very poor hiring decisions. Ms. Brooks has already paid a small price and resigned. What will you advise your Board about your son? Will you urge it to ask for his resignation or will you dismiss him yourself?”

“Suppose we accept your assertion that once in a while, even the best executives – like your direct reports – get duped by the people they hire. Now, CEOs also bear the responsibility of articulating policies, and charging their executive teams to build processes to assure conformance to these. Did you craft policies proscribing the types of malfeasance investigators are uncovering at News Corp? If not, why not? If so, did your executive team create strong processes to detect and stop the violation of these policies? If they did, which processes failed and why? If they didn’t, shouldn’t you conclude they failed to uphold their fiduciary responsibilities to you and to your shareholders?”

“A CEO also sets the vision and creates the strategy for his/her companies. If the indefensible criminal acts that we are investigating did not result from a culture that tolerated corruption or a leadership team which was ineffective, or non-existent polices and processes, were they a direct result of your vision and strategy at News Corp?”

“You say that you are the best person to clean up the mess. Given your failure to create an ethical culture, hire an effective management team, and implement needed policies and processes, why should your Board of Directors trust you? If it does so, wouldn’t the Board violate its fiduciary responsibility to shareholders who aren’t members of the Murdoch family?”

“Finally, your assertion that you aren’t responsible for the mess at News Corp clearly implies that you reject a widely accepted principle of leadership: the captain of a ship is responsible for everything that happens on it – even for mistakes made by no-name underlings. In other words, this principle says that responsibility is inextricably intertwined with command and authority. If a premier business school asks you to talk to its students about leadership, how would you explain the gap, chasm actually, between this principle and your testimony today?”

The failure to publicly ask such questions – instead of questions about what one person remembered or not – poses a significant danger to all businesses: People may well come to believe that what happened at News Corp is the norm, and not an aberration. This is patently untrue, but hard to refute.

The greater danger for businesses – and society in general – is in the long-term impact on today’s business students. What lessons did they learn about leadership at a point in time when our society and economies are in desperate need for greatness? I fear that at least some will conclude that real politick always trumps ethics in the executive suites. Despite the ubiquity of courses on ethics in business schools today, these few will conclude they don’t need to be ethical. And they will be at the source of comparable scandals of tomorrow.

On the day of the Murdochs’ testimony, News Corp’s share price rose sharply. Talking heads in the media told us that the markets had concluded that the hearings didn’t damage them unsalvageably and indeed, James Murdoch acquitted himself well. I, of course, disagree: my standard for a senior executive to have “acquitted himself/herself well” is considerably higher than that defined by Sergeant Schultz.

I hope News Corp’s outside directors will force a discussion of these issues. Their company will be much better for it. I don’t expect them to share their assessment externally (even in a summarized, sanitized form), but if somehow they did, the next generation of leaders would be exposed to a starkly different perspective on leadership than the one that emerged in London. That cannot possibly be a bad outcome for anyone who believes that businesses add great value to our society – except for the Murdochs.