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Saturday, November 14, 2009

How do you know a bad CEO when you see one? 


If you are an investor, director, or employee, beware CEOs who "win" personal business awards.

Compensation, status, and press coverage of managers in the United States follow a highly skewed distribution: a small number of “superstars” enjoy the bulk of the rewards. We evaluate the impact of CEOs achieving superstar status on the performance of their firms, using prestigious business awards to measure shocks to CEO status. We find that award-winning CEOs subsequently underperform, both relative to their prior performance and relative to a matched sample of non-winning CEOs.

Ego is expensive. Few successful leaders have any shortage of ego, but you need to pay attention when it starts to get out of hand. CEOs who aggrandize themselves are rarely helping anybody other than themselves.

CEOs who seek "awards" almost always love talking to the press. While that can make sense if your company sells a consumer products, there is rarely a good reason to speak to the press if your customers are other businesses or professionals or otherwise uninterested in you personally. There are, however, plenty of reasons not to talk to the press, including that the media loves nothing more than to tear down its own creations and politically ambitious prosecutors will gain more if they can pin a business crime on an executive with a public image to uphold. Neither is good for the CEO's company. A CEO should therefore spend as little time on television or talking to the general media as humanly possible.

4 Comments:

By Blogger DEC, at Sat Nov 14, 11:50:00 AM:

"A CEO should therefore spend as little time on television or talking to the general media as humanly possible."

As a business owner, former journalist, and former PR consultant, I totally agree with that statement.  

By Anonymous Anonymous, at Sat Nov 14, 03:33:00 PM:

Should we be worried about Obama?

Davod  

By Anonymous Anonymous, at Sat Nov 14, 04:13:00 PM:

I'm not sure how extensive the study was but there are a lot of reasons why it may be true.

The well known executives getting awards are at or past the top. They have already won. Their talents are honed, their patterns of solving problems and estimates of the future worked.

That does not mean those tools will keep working.

Athletics are perhaps the extreme illustration of peaks. The Yankees are World Champions. Next spring it will mean nothing.

Then they will still have their awards, rings, and memories. The media will continue to interview them. And it won't help them win one single game.

K Too  

By Anonymous Anonymous, at Sat Nov 14, 05:41:00 PM:

This article by Terry Leap also highlights the extent to which narcissism is a signal of trouble: http://online.wsj.com/article/SB119620217240705721.html  

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