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How much CEOs matter to firm performance:
"Do CEOs matter?" has been a perennial question in management discourse. But "the CEO effect" has been notoriously difficult to isolate -- a moving target caught in the slipstream of dynamic forces that shape firm performance.
So Morten Bennedsen, INSEAD Professor of Economics and the André and Rosalie Hoffmann Chaired Professor of Family Enterprise, along with colleagues Francisco Perez-Gonzalez (ITAM and NBER) and Daniel Wolfenzon (Columbia University and NBER) decided to find out how much CEOs matter by measuring the impact on firm performance when a CEO is absent, specifically, hospitalised.
They find, in a forthcoming paper, "Do CEOs Matter? Evidence from Hospitalization Events", soon to be published in the Journal of Finance, that the financial ramifications of CEO hospitalisation are significant.
Based on data of nearly 13,000 Danish SMEs between 1996 and 2012, Bennedsen and his co-authors find that five-to-seven day hospitalisations sent firm profitability tumbling by 7% in the year of illness. Longer hospital stays of 10 days or more wreaked even deeper damage, lowering operating return on assets (OROA) by a full percentage point.
Journal Reference
Morten Bennedsen, Francisco Pérez-Gonzalez, Daniel Wolfenzon. Do CEOs Matter? Evidence from Hospitalization Events, The Journal of Finance[$] (DOI: 10.1111/jofi.12897)
See also: Phys.org
[Source]: INSEAD research
(Score: 2) by The Mighty Buzzard on Wednesday April 08 2020, @02:35PM (9 children)
The mean doesn't have anything to do with their value, that's envy speak. Their value is judged by the difference they make in filling the position.
My rights don't end where your fear begins.
(Score: 2) by JoeMerchant on Wednesday April 08 2020, @03:31PM (8 children)
Is it, though? When entry negotiations include multi-million dollar bailout provisions, that seems like a hollow argument.
Company I worked for in Houston had a Cowboy CEO come though, damn near sink the place, then excuse himself and his CFO from further leadership on pretense of an options scandal - taking "only" $5M on the way out the door as "punishment" for his poor performance (would have been $15M cash + hundreds of millions more if he had made his options to be worth anything...)
🌻🌻 [google.com]
(Score: 2) by The Mighty Buzzard on Wednesday April 08 2020, @04:05PM (7 children)
Yep. Actual value not what the board pays them because of shady kickbacks or what Clueless George on the street thinks they should be paid because he's unhappy with his shitty wages.
My rights don't end where your fear begins.
(Score: 2) by JoeMerchant on Wednesday April 08 2020, @04:50PM (6 children)
This is where I expect more from leadership: Clueless George may be clueless, but once you're "up there" with 1000x Clueless George's income (nevermind net worth, Clueless George's net worth is negative), I expect leaders to bring the Clueless Georges of the world not only a little more clue, but also a little more opportunity.
The net compensation of the bottom rungs should be increasing, percentage wise, faster than the net compensation of the top rungs - not the opposite. It's not that the top rungs shouldn't get more, it's that they shouldn't continue to accelerate their climb to the stratosphere on the backs of hundreds of thousands of people they could be doing more for, but choose not to - and I'm not talking about eyewash philanthropy, I'm talking about the mainstream economy.
Going from where we are all the way to all singing Kumbaya in an egalitarian circle around a campfire is neither realistic, nor necessary, but the direction we're traveling in does matter; we've been going the wrong way for my entire adult life, and we seem to be accelerating. The top will reach much greater heights by building up all levels than they will by extending their distance from the bottom, but that doesn't seem to enter into their thinking much, if at all.
🌻🌻 [google.com]
(Score: 1) by khallow on Wednesday April 08 2020, @07:18PM (4 children)
Sorry, that's not their job. Look to the thousands of Clueless Georges instead. It's their jobs to get both clue and opportunity. If the Clueless Georges aren't interested, then that's a strong indication that nobody else should be either.
(Score: 2) by JoeMerchant on Wednesday April 08 2020, @11:03PM (3 children)
Yes, of course, shall we fight a thousand cat sized elephants, or a single elephant sized cat?
Billionaires are much more pleasant creatures when they go places like Yellowstone, the majority of the population on the planet (human and otherwise) are not so well treated by them.
🌻🌻 [google.com]
(Score: 1) by khallow on Thursday April 09 2020, @01:39AM (2 children)
You have yet to show that we should mess with the elephants/cats in the first place.
(Score: 2) by JoeMerchant on Thursday April 09 2020, @03:09AM (1 child)
The cat sized elephants get their asses kicked every day, and they outnumber the elephant sized cats 100,000:1.
Yes, the cat sized elephants should stand up and demand more, but that's a tall order when you're either occupied with a 40+hr per week career or marginalized by society.
🌻🌻 [google.com]
(Score: 1) by khallow on Thursday April 09 2020, @03:40AM
In other words, this "ass kicking" isn't very important to the elephants. I think you know my take on that, if it's not important to them to improve their lives in this way, then it's not important to me.
(Score: 2) by The Mighty Buzzard on Thursday April 09 2020, @01:42PM
What. The. Fuck.
Dude, their job is running a business. They are not Clueless George's daddy and they are not his community leaders. They are his employer. Clueless George is there because he says he has something to offer in exchange for money. Contracting someone for their labor does not obligate you to do anything except pay them the agreed upon amount.
That is one hundred percent commie bullshit. People should be paid according to the value they bring to the company. Period. If they can be easily replaced by a teenager who doesn't know his ass from a hole in the ground, it would not only be foolish but also unethical to pay them any more than a teenager who doesn't know his ass from a hole in the ground.
Why the hell do progressives seem to want everyone to be their fucking daddy? Very distinctly progressives and not liberals here. Actual liberals would never stand for being bossed around like children in return for someone solving all their problems like children. Is the idea of personal responsibility really that terrifying to you guys?
My rights don't end where your fear begins.