September 10, 2007
CEO's Personality Cult Promotions Bite Back
CEO's, in justification of their very generous salary and severance packages, have trumpeted their unique importance to the success of any company -- "We make or break companies." Personality cult promotion by companies of their CEOs is now a common marketing tool. It may have backfired. Researchers are running correlations on CEOs' personal life to their performance. We have studies on CEOs buying large houses and CEOs frequency on the front page of business magazines (there are negative correlations to performance on both). The latest is a study on family deaths. CEOs that have suffered the death of a child (or spouse) belong to companies that underperform the market (the death of an in-law correlates to market overperformance). Trading on CEO family loses is profitable but unsavory. CEOs do not welcome this kind of introspection (as none of us would) but it may be inevitable due to the larger than life role of the CEO in the profitability of a company -- something the CEOs have themselves told us to true.