UNDER THE MICROSCOPE: Over the past week, there have been numerous reports of advisers close to Russian President Vladimir Putin lying to him about the status of the invasion of Ukraine. This sort of behavior, from putting a good spin on something to outright lying to insulate the boss from bad news, reminded me of the fictitious story of the “Emperor with no clothes”* but also with the reality of how BIG American businesses operate. This created a new mission for investigation by the Life Detective: is the Russian government run like a business?
The Corporate CEO as Emperor
All of us have been exposed to the impacts of BIG corporations. Decisions get made in the interest of quarterly or annual profit regardless of the long-term or overall societal impact. But internally, how does the sausage get made? The jaded eyes of Life Detective’s investigator have previously observed that the structure of an organization may see an operational flow that goes something like this:
- CEO puts a good face on current and future operations to the board and shareholders.
- A manifesto is devised in concert with professional smoke-blowers (known as consultants) whose feigned independence is used to substantiate the CEO’s “vision” via a well-articulated strategic plan embodied in a PowerPoint and reinforced with 1 GB spreadsheets.
- A message from the CEO goes out to the executive team, commonly hired from groups inside a social business circle connected by Wall Street finance, industry, prior jobs, or a shared university experience.
- The executive team spreads the single message of the CEO/Emperor, and the worker masses set out to fulfill the CEO’s wishes as embodied in the strategic plan.
Regardless of whether the specific goals of the strategic plan are achieved, what seems most critical is making it appear as if things are “on plan.” This dynamic may lead to an internal dialogue between executives, management and staff consisting exclusively of “blowing smoke up someone’s ass” to ultimately please the CEO. While groups of workers get together to sing “Kumbaya,” those who deviate from the plan, or the messaging meant to show progress toward the plan, may be blackballed as not being “team players”. Worse, human resources may be consulted. Conscientious objectors may face penalties like being dispatched to a “special project” or even face termination, accepting a severance payment and “non-disparagement” clause on their way out the door: then the masses are informed the dearly departed is “pursuing other interests.”
Comparing Russia Inc. to BIG American Business
Today’s Russian government (“Russia Inc.”) is an autocracy. Russia is technically no longer a communist country. Arguably, Russia Inc. may be seen as being run like a business: there is a strong CEO who, together with a small board of directors, influential shareholders or senior executives known as “oligarchs”, derive a disproportionate share of profits. CEO Putin’s exact net worth is nebulous, but some estimates suggest it could be anywhere from $70 billion to $200 billion. If the high end of that estimate is true, Putin would be ahead of the likes of Bezos, Musk and Gates. The top 10 oligarch shareholders who comprise our mythical Russia Inc.’s board of directors are all multi-billionaires. The CEOs of the largest 350 American public companies earn an annual salary of $24 million. If anything, Russia Inc. sounds like it is run like a very successful business, at least when it comes to benefitting its CEO and board of directors.
There are other similarities between Russia Inc. and the typical BIG American corporation. Like CEOs in BIG corporations, CEO Putin has the right educational pedigree. However, unlike American corporations where the right education might be an MBA from Wharton or Princeton or a law degree from Harvard or Yale, graduating from the KGB is preferred for leading the Russian organization where vital skill sets include state security, intelligence/spying, and managing the masses with a secret police force. Just as a corporate CEO may be selected by a Board of Directors (elected by shareholders), elections are held to elect Russia’s CEO. However, the elections seem to lack credibility and the existing Russia Inc. CEO tends to stay on at will. Opposing the CEO’s reelection is done at one’s own peril. When Alexey Novolny politically opposed the current CEO in 2020, he mysteriously became a victim of suspected poisoning. While American corporations may defensively use a metaphorical “poison pill” to prevent a hostile takeover by upstart investors, the business of Russian government may affirmatively use real poison!
Operationally, the war in Ukraine has created an insider view as to how Russia Inc. is run like a business. CEO Putin has set out to conquer all or part of Ukraine. Although things do not seem to be going too smoothly, Russia Inc.’s senior leadership appear to be up to the task of blowing smoke up the CEO’s butt. There are numerous reports of Putin’s top advisers lying to him, not telling him how poorly the military effort is going. This sounds amazingly similar to the description of how BIG western business operate: the CEO sets the goal; senior management goes along with it and attempts to implement the plan . . . and no one wants to stick their neck out to question the plan.
The Right CEO/Emperor is Essential . . . because the Emperor has No Clothes
When the entirety of a business is afraid to vary from the plan defined by the CEO/Emperor, it is clear that the CEO/Emperor better have a damn good plan! In that sense, maybe $24 million per year is a justified salary for American CEOs. But when the CEO/Emperor has a bad plan, things may well end in disaster!
That brings us to our consideration of Russia Inc. While Putin may have a strategic goal of making the Soviet Empire great again, the reality is that Russia appears weaker and its everyday people are in worse condition following the invasion of Ukraine. Russia has suffered greatly: soldiers dead and wounded, economic sanctions harming the economy, and general isolation from much of the Western world. The CEO/Emperor appears to have a bad strategic plan and his own leadership is lying to him to ensure Russia Inc. is “on plan.”
So, is Russia Inc. run like a business? When it comes to employees blowing smoke up the CEO/Emperor’s butt to save their own neck, the answer seems to be “yes”. However, there is a significant difference from BIG American business as well: when Russia Inc.’s employees “drink the Kool Aid,” they may end up like the cult followers from which the phrase was derived.
* “The Emperor has New Clothes” is an 1800’s folk tale written by Hans Christian Andersen that became a popular children’s book. To refresh everyone, the Emperor is obsessed with looking good in his new clothes and spends ridiculous sums of money to fulfill his ambition. He is duped by two weavers who, instead of making him some fine threads convince him the imaginary clothes they made for him actually look great. After his closest confidants confirm how well his invisible clothes appear, he emerges in a procession to show off his imaginary outfit. His loyal subjects see him and say how great his clothes look, until one child calls out the absurdity and says, “But the Emperor has no clothes”.