The Private Lives of CEOs

September 06, 2007

The Private Lives of CEOs

barkermansion.jpgThe Wall Street Journal had an illuminating article yesterday about how the private lives of CEOs impact share price and performance. Let me list the reported results first and then tell you what I think.

  • CEOs with large homes run companies that perform more poorly after the purchase. NYU professor David Yermack measured the square footage of CEO homes to arrive at this finding. The rationale for stock erosion subsequent to buying the home is that it brings additional responsibilities such as gardening, more time spent enjoying the mansion and I guess admiring the view.
  • CEOs who lose a child, spouse or significant other (the exception being a mother-in-law) are more likely to be distracted and see stock performance suffer. This survey was conducted by Professors at Copenhagen Business School, NYU and the University of Texas.
  • CEOs who are narcissists take greater risks resulting in greater fluctuations in company profitability. Narcissism was calculated by assessing CEO photo size in annual reports and frequency of first person singular in media interviews. The study was conducted by Professors Arijit Chatterjee and Donald Hambrick.

Clearly, life events affect CEOs and this impacts company performance. And yes, this information matters deeply to investors.  And yes, this information all points to the importance of CEOs which is continually debated (not sure why?).

After studying and researching CEOs for many years now, I was distressed to see how much time and energy went into examining these personal details of a CEO’s life. Here is what I learned about how Professors Yermack and Crocker Liu of Arizona State University went about their research on big CEOs’ big homes: “Prof. Yermack and Crocker Liu of Arizona State University set out to find real-estate records on the CEOs who were running all of the S&P 500 companies at the end of 2004. They scoured electronic records of taxes and deed transfers. When they couldn’t find a home address, they turned to databases on voter registration rolls and campaign contributions. Eventually they found the addresses of 488 of the 500 executives.” They also made good use of aerial photographs now on the Internet to determine if CEOs had swimming pools, tennis courts, boathouses and other luxuries (surely hot tubs!). Shouldnt university professors be examining how to build successful companies? The research reported above takes many many hours to conduct.

The research I have conducted at Weber Shandwick found that CEOs are indeed important to company reputations. When I checked last night, nearly 3,000 readers who responded to the WSJ’s poll on whether CEOs matter seem to agree: 54% said CEOs are very important, 33% said moderately important and only 14% said they were not important. This finding is close to what my research has shown over the years. If you want to learn more about why CEO reputation matters, please read my book (CEO Capital: A Guide to Building CEO Reputation and Company Success). This should not be such a mystery. We may wish CEOs did not matter but they sure do.

  

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Leslie Gaines-Ross
Leslie Gaines-Ross
lesliegainesross@gmail.com

As Weber Shandwick’s Chief Reputation Strategist, I focus on the ever changing world of reputation. For the past 25 years, I have relentlessly observed, researched and commented on the rise and fall of reputations.

2 Comments
  • Erin
    Posted at 18:24h, 06 September Reply

    Love the look of your new site – Great colors! Hope you had a wonderful summer!

  • Belinda Graban
    Posted at 10:51h, 31 August Reply

    this is a laugh for you from me :)Living healthy is merely the slowest possible rate at which you can die. 🙂

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