As Xerox CEO, Anne Mulcahy stumbled into an environment of uncertainty, but once she learned the full extent of her company’s problems, she moved quickly. Mulcahy knew she couldn’t fix Xerox by herself; she needed support from the whole team. To gain their cooperation, she would need to inform each person about the new reality for Xerox. So, Mulcahy visited each of Xerox’s top 100 executives and, mincing no words about the grim situation, asked whether they were “in.” To her credit, all but two stood with her. Today, most of those managers remain at Xerox. Mulcahy spoke directly and honestly with shareholders, too. While some CEOs avoid giving unpleasant news to shareholders and try to pacify them at all times, that is not Mulcahy’s style. What mattered most, she reasoned, were relationships with Xerox’s employees and customers. Speaking to the shareholders, she characterized Xerox’s old business model as “unsustainable” and warned that unless Xerox cut expenses and increased the profit margin, it would never return to profitability. By the next day, the stock price had tumbled 26 percent. Yet Mulcahy stuck to her guns. She discontinued paying a dividend to shareholders, then began the difficult task of slashing expenses and eliminating unnecessary jobs. At the same time, she told the sales force she’d go anywhere to meet with Xerox customers and assure them that Xerox was getting back on track. Where Mulcahy didn’t have expertise, she became a quick study. Lacking financial expertise and with Xerox under SEC scrutiny, she asked her finance people for a “crash course” that would enable her to hold her own in meetings with the SEC.

• Unlike many CEOs who put shareholders above everything, Anne Mulcahy decided to put employees and customers first. Why do you think she picked that alternative when it could generate conflict with the shareholders?

• Mulcahy could have declared bankruptcy for Xerox. Instead, she chose a hard program of cutting expenses and reassuring customers that the company would turn around. Why do you think she chose the alternative she did?