September 7, 2010
Shareholders and CEOs: The Tail Wagging the Dog?
Over at CNBC, Gary Kaminsky writes that Oracle's courtship of former HP CEO Mark Hurd is something for shareholders to watch. Kaminsky argues that shareholders need to be concerned "about owning shares when the CEO is larger in stature than the company itself."
This is an interesting take, but as financial advice (if that is what it is) it seems to me to be missing the point. It seems to me fine for investors to believe in a company with a certain CEO at the helm and not with another, just as it is fine for people to believe in the Minnesota Vikings with Brett Farve at the helm and not Tarvaris Jackson. These investors (or sports fans) may very well be right that the organization's potential is tied to a specific person. Then again, they may be very, very wrong. For a great sports example, consider the 1999 St. Louis Rams. Trent Green was signed to be their quarterback, and he tore his ACL in the preseason. A little-known quarterback from Northern Iowa name Kurt Warner steps in and calmly become a Super Bowl MVP.
Maybe Oracle is in the process of signing their Drew Brees -- the once under-appreciated San Diego Charger who brought the New Orleans Saints a Super Bowl. Then again, maybe it will be more like the Cleveland Browns signing of Jeff Garcia (i.e., not good).
The real problem with this analogy, of course (and Kaminsky's analysis in my view), is that it treats investors more like sports fans (and even sports gamblers). In once sense, I suppose this is fine, but it seems to me that it validates the idea of investors as gamblers, which may be correct, but it doesn't make it right.