(Lucy P. Marcus is a board chair and non-executive director,
and the CEO of Marcus Venture Consulting. The opinions expressed
are her own.)
By Lucy P. Marcus
April 1 General Motors chief executive officer
Mary Barra is appearing before Congress this week to explain why
GM took more than a decade to issue a recall on a faulty
ignition switch, which led to at least 13 deaths. The hearings
will be a proving ground for Barra, who became CEO in December
2013, as well as for GM's new chairman, Theodore "Tim" Solso,
and the entire GM board.
Congress will question why Barra's most recent predecessors
didn't catch the defective switch. A likely explanation is that
the board and senior management were so focused on digging GM
out of bankruptcy that they weren't paying attention to what
else may have been going amiss.
Of course, that excuse is insufficient, since the company
needs to do both things simultaneously: avoid bankruptcy, while
building safe cars. Barra, Solso and the board must convince
Congress, the markets and consumers that they have identified
why the faulty ignition switch went undiscovered for so long,
and that they can be trusted to prevent a similar crisis from
At GM, the board and executive team must look back at the
last decade and determine what went wrong - both within GM, and
also in the relationship between the board and senior
management. As a board director I can say this is not always a
comfortable process, but it is vital that every board director
understand the historical dynamic between the management and the
board. Most of the current GM board members joined the board
after 2009, but they can learn valuable lessons about why the
recall did not occur earlier, what previous boards should have
been doing and why the board is only now finding out about the
The board must also make sure there will not be another
situation where executives make a decision under the guise of
protecting the company, but in the end puts GM in an untenable
position, like the one it's now in. In the case of the faulty
switch, GM chose to create two small and isolated committees to
handle recall cases, fashioned in such a way that senior
executives were purposely kept in the dark. Board members have
an obligation to challenge senior management's thinking on these
types of decisions and structures, which seem to make sense
within in a bureaucracy, but in reality put the company at risk.
GM's board, like every board, has a multifaceted role as
watchdog, ethical center and independent thinker. The
independent directors will need to redouble their efforts to
take what I call a "hands on, but not hands in" approach -
having a deep understanding of the business and a strong
relationship with the management team, but still maintaining
enough distance to remain independent on all issues, be they
"grounding" or "stargazing" ones.
The past decade has been tumultuous for GM, featuring five
CEOs (four in the past six years), a bankruptcy and a government
bailout. Under Rick Wagoner, who was named CEO in June 2000 and
became CEO/chairman in 2003, GM lost more than $85 billion and
was forced into bankruptcy. We now know that GM engineers first
documented the faulty ignition switch 13 years ago, during
Wagoner's tenure. GM says it is still investigating why the
situation was so badly mishandled; as far as we know, the
engineers didn't tell the senior management because of an
organizational structure that Wagoner created.
The ignition switch recall has been a big test for Barra,
and one that she has so far managed well. She reportedly learned
the full extent of the problem on January 31, two weeks into her
tenure as CEO. Since then, she has gone to great lengths to get
in front of the issue, speaking about it publicly in mid-March,
meeting with the press, recording a number of YouTube videos on
the topic, and appointing GM veteran Jeff Boyer to a
newly-created post of VP of Global Vehicle Safety with a mandate
to "quickly identify and resolve product safety issues." Boyer
is said to have "direct and ongoing access to GM leadership and
the board of directors on critical customer safety issues,"
which suggests that the board is invested in the issue.
Going forward, one of Barra and the board's most important
tasks is to do a deep audit of the entire company, looking for
anything else that might be lurking in the shadows, such as
product defects, overly bureaucratic processes that keep issues
from surfacing, financial mismanagement or labor issues.
GM needs to prove that if it becomes aware of another
serious issue within the company, it will respond with speed and
transparency. As the recall situation demonstrates, the cover-up
and mismanagement of an issue can be far more costly -
economically, reputation-wise, and in loss of life - than the
act of dealing with an issue head on.
After a period of huge upheaval, GM is entering a new phase.
The U.S. government sold its final stake in the company in
December 2013, and GM must now focus on stability and growth:
stability in making sure it has a long-term CEO, and growth in
rebuilding its businesses during tough economic times.
Running a business the size and complexity of GM is no easy
feat. Throw in its complex financial situation, global
operations, and the myriad of issues that the board deals with
at any one time - from labor relations, to financing, to safety,
to regulations - and it is as complicated as any large financial
In a video last week, Barra recognized the need for change
at GM in the wake of the recall. "Clearly the fact that it took
over 10 years indicates that we have work to do to improve our
process and we are dedicated to doing that," she said.
If Barra works closely with her executive team and board -
and the board is committed to strong oversight and strategy - GM
has a fair shot at succeeding.
(Lucy P. Marcus)