SLM: The CEO and the Mic Were Hot

Jack Flack was mildly curious when he first read the original reports that newly returned boss Al Lord got snippy on last week's SLM conference call. To top it off, Lord even ended the broadcast with a sign-off more expected of a lame comedian than the head of one of America's lending cornerstones.

That seemed odd. After all, Lord is no newbie to the world of Street scrutiny. And so how could he handle things so badly?

George Anders took a nice stab at answering that question in today's WSJ, attributing it to a strong sense of powerlessness that Lord must surely be feeling as he faces Sallie Mae's woes. Jack Flack does not know either Lord or Anders. But the column feels right, in that it gets beyond the predictable, superficial assessment ("fat cat hubris") and tries to understand how a veteran like Lord could crack like that.

Intrigued the Anders piece, Jack Flack actually listened to the full audio, which was quite educational. While the print reports accurately described several of Lord's comments as sarcastic, bellicose and belligerent, a full listening tells a more interesting story. Three things are obvious to the ear about the call.

The strategy was appropriate. Three days back into the CEO saddle, Lord would have been foolish to get into too many details. SLM has a full-blown investors meeting scheduled for mid-January, and surely the strategy for the call was to acknowledge the seriousness of the company's problems and then set expectation that the live encounter a few weeks later would be more satisfying. (And also, as Anders indicates, a couple of equity-infusion deals could get done before then, which would likely make for a better vibe.)

The intentions were correct. Lord came into the call with the full intention of taking his beating like a good, seasoned leader. (Or at least whoever scripted his call had that intention.) For the most part, the language was plain-spoken, unsoftened and accepting of accountability. But not too far into the Q&A, something got under Lord's skin, and the edginess quickly morphed into open frustration.

The joke was planned. After the tone of the call had fully cratered, Lord got zero laughs when joked that those attending the upcoming meeting would have to go through metal detectors first. The joke was surely pre-mediated, but in anticipation of a better mood.

The call turned out to be far more detrimental than it should. While SLM's stock slid 21% that day, confidence in Lord dropped far more than that. While he would have been criticized for stone-walling if he had stuck to short, simple non-answers, he still would have shifted focus to the January meeting without bringing additional scrutiny to himself.

The mini-meltdown provides three obvious lessons.

1. State of mind often trumps specific answers. While Kevin Depew offered some helpful suggestions on how Lord could have better-articulated his feelings, the real trick would have been for Lord to have actually changed his feelings. That may sound like an odd suggestion, but a big part of being a CEO is being able to manage your own mood, particularly in public settings. It's especially important for investors, who are influenced by tone and body language far more than they would like to admit.

A lot of CEOs struggle with this requirement. Some of that struggle is due to ego, but most of it is driven by the irritation a 27-year industry veteran naturally feels when zinged by a smarty-pants 27-year-old sell-sider who's never had the pleasure of working in a real business before, much less leading one.

2. Never try to joke your way out of a snake-pit. You can quip your way out of a sticky question or two, but never an all-out flogging.

3. Assume the mic is always on. It seems obvious. But when it's just you and your IR guy sitting in a conference room, a false sense of privacy can take over. Never trust the mute button. When the call is over, hang up, and then hang up again. And then walk ten paces out of the room before you even begin to mutter what's actually on your mind.