How to Deal With Authoritarian Bosses

Government bailouts, accounting scandals and regulatory uncertainty have all been blights on the Street of late. The real problem facing the finance industry, however, may be authoritarianism in the executive suite.

Authoritarian management style and culture is marked by rigid hierarchies, complicated bureaucracy, and managers who require total submission from their employees, demand adherence to strict edicts that only they can issue, become enraged when challenged, and discourage the input of underlings.

To most investment bankers and traders, this sounds like an average day at the office -- and, unfortunately, it is. Authoritarianism, often tied in with narcissism, is probably the most common management style on Wall Street, said Dartmouth Tuck School of Business Professor Ella Bell, a workplace expert and author of the book "CAREER GPS: Strategies for Women Navigating the New Corporate Landscape."

"Authoritarian managers have a remarkable ability to rise within organizations and set the tone for the entire culture," said Deirdre O'Donnell, an associate director of career development at Dartmouth's Tuck School of Business and a former banker at Lehman Brothers.

In highly subjective professions like those dealing with news or markets, authoritarianism is more often than not a management disaster that leads to talent departures, expensive training costs for new people, and pervasive organizational distrust, experts say. Authoritarianism comes in different flavors, said psychiatrist Dr. Roy Lubit, the author of "Coping with Toxic Managers, Subordinates...and other Difficult People."

A good example is one of Wall Street's most authoritarian managers, former Lehman Brothers chief Richard Fuld, whose bullying earned him the nickname "The Gorilla."

Fuld's disastrous decision not to listen to his head of fixed-income, Michael Gelband, may have accelerated Lehman's downfall. According to "A Colossal Failure of Common Sense," a book about the collapse of Lehman Brothers by Lawrence G. McDonald and Patrick Robinson, in 2005, Gelband told Fuld that the market for real-estate securities was softening and that he was worried about Lehman's exposure. Gelband told Fuld Lehman was likely to lose money. His frankness fell on deaf ears and drew political penalties. In 2007, Gelband grew tired of being thwarted by Fuld and quit the firm along with several others. (The postscript: In 2008, Fuld hired Gelband back because he was one of the few people with any ideas about how to handle Lehman's real-estate disaster.)

Fuld wasn't the only one.

Former Merrill Lynch chief executive E. Stanley O'Neal was well-known for his ivory tower management style and that he surrounded himself with "yes" men. O'Neal completely missed the fact that his firm was one of the primary underwriters and buyers of toxic mortgage securities that were unable to be sold. By the time O'Neal found out, it was too late to fix the problem.

Authoritarians, particularly of the narcissistic kind, have several characteristics that allow them to rise within investment banks, and even more so in a recession when people are fighting for their jobs, said Lubit.

According to Lubit, they are drawn to prominent positions and believe they are better than those around them. He has to believe he's better than everyone, or else he believes he's not better than anyone, Lubit said. "An authoritarian doesn't want to be surrounded by the best people, because they don't like to be challenged and need to be at the center of everything," he said.