As we all try to digest the unprecedented volatility that has besieged the stock market this week, with

Lehman Brothers



Merrill Lynch


now washed away, there is one question that is often repeated:

How could so many smart people get things so wrong?

It wasn't hubris or laziness. It was the inability of the board members and CEOs to look at the problems facing their companies with fresh eyes.

Newcomers like John Thain at Merrill took decisive actions to create the maximum shareholder value under the circumstances. Old-time CEOs like Dick Fuld at


and Robert Willumstad at


(AIG) - Get American International Group, Inc. Report

, who is a new CEO but has been on AIG's board since 2006, dawdled, and their companies are now paying the price -- one with bankruptcy and the other agreeing to a government bailout last night.

Management theorists Don Hambrick and Danny Miller conducted a study on the seasons of a CEO's tenure 20 years ago. They found that CEOs had the freshest eyes early in their tenure. They revisited old decisions made by their predecessors and charted a course for the organization under their leadership. After only a few years though, the CEOs began running their companies from within the prism of their past decisions. If their strategy didn't work out, they would defend it, stating that it simply needed more time.

This tendency for defensively believing in past decisions is not a CEO condition -- it's a human condition. It's not a trait that gets noticed when times are good, but it can be a deadly trait in so-called "perfect storm" times like the one we're currently living in.

It's up to the boards to hold CEOs responsible for their decisions by questioning them when warranted. Sadly, that didn't happen in the case of Lehman and AIG. In the case of both, it cost them the companies.

In this environment, even the most gilded companies' CEOs -- such as Lloyd Blankfein of

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Goldman Sachs

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and John Mack of

Morgan Stanley

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-- need to be questioned by their boards. Worst-case scenarios must be discussed and preparations made.

Just because a CEO has a long tenure at a company and holds the title of chief executive doesn't mean he or she will fail; it simply means he or she needs to be on guard against "conventional wisdom." Conventional wisdom a few months ago was that Lehman was no

Bear Stearns



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new CEO, Robert Steel, appears to be using his financial industry experience (he formerly served as head of equities at Goldman and undersecretary of the Treasury), as well as his lack of Wachovia tenure, to make quick moves in downsizing and separating the good and bad aspects of the bank in his first couple of months on the job. It warrants watching if he can be successful in doing what's needed at that bank in comparison to Thain's moves at Merrill.

Vikram Pandit, the CEO of


(C) - Get Citigroup Inc. Report

, deserves a lot of scrutiny. He came to Citi after his Old Lane hedge fund was acquired. So far, he has done little to separate himself from the model that Sandy Weill built and for which Chuck Prince acted as caretaker. Will Pandit be just another caretaker? How will Citigroup be defined under his tenure? We have yet to find out. In the meantime, the company's stock drifts lower with the industry, and Citigroup continues to pay a dividend it can't afford. There is no urgent capital-raising needed yet, but Pandit needs to have the pressure kept on him.

In these difficult times, all CEOs and directors must come to work each day with fresh eyes to confront the problems they face. No matter how much past success they've achieved, no matter how esteemed these CEOs are, Lehman and AIG have taught us how easily everything that it took generations to build can be lost.

There, but for the grace of God, go I.

At the time of publication, Jackson held no positions in any of the stocks mentioned.

Eric Jackson is founder and president of Ironfire Capital, LLC, and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd.