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Post Leadership
Posted at 11:55 AM ET, 05/16/2011

Who will succeed Dominique Strauss-Kahn, and why didn’t IMF have a better plan in place?


Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF), was charged with attempted rape and a criminal sex act on a New York hotel maid, police said. (Peter Foley - BLOOMBERG)
Boards of directors have to replace leaders for all kinds of reasons. They die. They fall ill. Their performance falters or their strategy veers off course. And yes, they get carried off of airplanes and arrested for allegedly sexually assaulting a housekeeper in their New York hotel while traveling on private business.

Not all that often, of course. But such unexpected scenarios can happen—and will, especially when you’re dealing with the world’s most powerful people—and it’s the board’s job to prepare for them. And that’s certainly the case when the leader in question shoulders delicate diplomatic solutions for Europe’s expanding debt crisis and has already signaled his plan to leave his post to run for president as early as this month.

What the IMF’s board did in response to the arrest of its managing director, Dominique Strauss-Kahn, was fairly predictable. It named the organization’s existing No.2, American John Lipsky, to be acting president and meet with world leaders while Strauss-Kahn awaits his fate back in New York. Strauss-Kahn could turn out to be innocent, and replacing him now with a permanent successor might have made it look like the IMF had written him off.

Except, of course, that the man was about to leave his job anyways and run for president in the next month or two. Lipsky was on his way out, too—he announced last week that he would be resigning in August. And unlike other leadership transitions, when the board can afford to have an interim chief in place for a while who keeps things in a steady state, in this case the responsibilities—nothing short of the health of the world economy, mind you—are simply too consequential.

All of which makes me wonder why the IMF’s board didn’t go ahead and make Strauss-Kahn’s permanent successor the acting or interim managing director. If he’s found guilty—or innocent, for that matter, and decides to proceed with his presidential campaign (now an extremely unlikely outcome)—the new MD will have already begun exercising his power. And the leadership continuity would surely help in the tricky discussions taking place over the finances of Greece, Portugal and other European countries whose economies are on the rocks. On the flipside, if Strauss-Kahn is somehow cleared of all of the charges, and decides not to run for president, he could always return to the IMF in a chairman-like role and mentor his successor for a little while until the end of his term. The managing director of the IMF is a five-year gig anyways, and Strauss-Kahn’s term was set to expire at the end of 2012.

The fact that this did not happen does not surprise me, especially given Strauss-Kahn’s stature prior to the recent charges. He was seen as a muscular negotiator who knew his way around the most exclusive halls of European power and was credited with boosting the IMF’s relevance amid the financial crisis. He was doing very well in the French presidential polls, with fans on the left and the right, and was seen as the likely man to beat current president Nicolas Sarkozy.

The board may have been caught ill-prepared to replace such a powerful and well-regarded managing director. Or there may very well be a hand-picked successor already waiting in the wings at the IMF. There is much speculation that the new managing director could hail from an emerging market such as South Africa or Brazil, though everyone from Pimco’s Mohamed El-Erian to French Finance Minister Christine Lagarde has been mentioned. But by not naming one of these officials acting director now (especially with the current No.2 one foot out the door already and Strauss-Kahn’s future at the IMF unlikely, no matter what the outcome of the charges), the IMF’s board missed an opportunity for a smooth transition and the best chance possible at leadership continuity.

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How sleep deprivation can make you unethical

By  |  11:55 AM ET, 05/16/2011

 
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