The Exec-Ed Zone

Executive education is expensive; it may be good value but still the upfront cost is not cheap. That is why in the new custom program profiles we are building on the IEDP.info website (to go live later this year) we have a slot that allows the providing institutions the chance to suggest how large an organisation that uses them typically is; the intention being to avoid the awkwardness of having to tell a well-meaning but small company "...er, sorry, you can't afford us". To give the schools their due, this is more often because they require a minimum cadre of executives to make custom programs viable and smaller organisations often are unable to meet that number.

Where I am going with this, is that numbers matter. Larger organisations and richer ones can get things smaller, more cash-strapped businesses can't. No great news there. The largest businesses on the planet these days are in the oil, pharmaceuticals and financial services sectors. And we have come to view the titans of these sectors with a degree of awe and envy. They certainly make up the leading buyers of exec-ed programs - but more than that we unconsciously expect them to be run by the cleverest and the best - if for no other reason than they tend to be the highest paid corporate sectors.

Lord Browne, the recently deposed CEO of BP, the second largest oil company and fourth largest company in the world, has been traduced in a recent article in Portfolio magazine since his fall from grace. Lee Raymond, the former boss of ExxonMobil, has been victim of public slating for many years. The pharmaceutical companies are continually running PR campaigns to justify their skewed revenue process (that they have to make an obscene amount from successful drugs - the ones that cure people - to offset the costs of the R&D into failed ones). Currently it is the turn of the financial services sector to justify their, to the rest of us, exorbitant remuneration packages. The truth of the matter is that while the mega-bucks on offer in these sectors may allow them to engage the finest minds (by academic training) - the quality of management and decision-making is little different from other sectors. It is just that a meagre percentage profit take from a large financial transaction or oil find is always going to buy you a nicer car, house or yacht than an equivalently clever or complicated deal in the engineering sector.

The last few weeks have seen the global equities market in panic and turmoil because the über-clever designers and brokers of ever more complex loans had lost sight of the root of their products. They had got so engrossed in the theoretical curves and percentages of risk that were designed so that their banks - and so they - could earn super-profits on them. But under-pinning all these collaterised debt obligations (CDO) and structured investment vehicles (SIV) was a real, tangible asset. And that, as the Sunday Times highlighted yesterday was characterised by mobile homes in Florida, which I suspect was not on their minds as they bundled their bonds into ever more sophisticated wrappers. The same article also quoted Trevor Williams, chief economist at Lloyds TSB as pointing out that "this is a financial market crisis and most of it will stay in the financial markets” .

But because the financial markets are so big and everyone is linked into them through their savings, their pensions and their mortgage it does appear more significant. Add to this the fact that when the "masters of the universe" get in a panic - we presume it is something really dangerous. The flip side to the current turmoil is that in the real world where we do not know of or need to know of CDO's and SIV's, businesses we have heard of and interact with are still reporting substantial profits and healthy outlooks. As Robert Peston, the BBC's economics editor mentions in his blog today, the banking debt wizards knew no more about their CDO's ingredients than a child does of his Turkey Twizzlers (a very cheap kids food made from machined up turkey amongst other less appetizing ingredients, summarily discontinued after a high-profile TV expose) . I am hopeful that the current excitement will turn out to be as significant to the wider world as the Turkey Twizzler banning was; a major headache for the industry concerned but a sideshow for everyone else.

If a lesson can be drawn from the credit and equity maelstrom of the last weeks - it should probably be that the highly paid professionals are no better than their poorer brothers and sisters in less glamorous sectors. Perhaps an executive education series for the Masters and Mistresses  of the Universe in the "folly of hubris" and "perils of too much self-confidence" should be made available?