Following that same general theme -
Superstar CEOs Suck
By Paul Kedrosky · Friday, November 13, 2009 ·
From a new Quarterly Journal of Economics paper:
Superstar CEOs
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. At the same time, they extract more compensation following the awards, both in absolute amounts and relative to other top executives in their firms. They also spend more time on public and private activities outside their companies, such as assuming board seats or writing books. The incidence of earnings management increases after winning awards. The effects are strongest in firms with weak corporate governance. Our results suggest that the ex post consequences of media-induced superstar status for shareholders are negative. [Emphasis mine]
Source: Ulrike Malmendier and Geoffrey Tate, “Superstar CEOs*,” Quarterly Journal of Economics 124, no. 4 (November 1, 2009): 1593-1638.
paul.kedrosky.com
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.
tigerhawk.blogspot.com
Other explanations would include
1 - The unusually good performance that got the CEO the attention may have been relatively random, or may rely on factors that aren't durable.
2 - If your measuring by stock prices - All the attention will have driven up the stock price, so future gains are harder.
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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.
tigerhawk.blogspot.com |
