Wednesday, June 06, 2012

Are CEOs Spending Too Much Time Outside the Firm?

A new study suggests that some CEOs may be spending far too much time outside the firm.  Oriana Bandiera, Luigi Guiso, Andrea Prat, and Raaella Sadun have written a paper titled, "What Do CEOs Do?"  They examined how 94 CEOs of top-600 Italian firms spent their time.  According to these scholars, "The patterns we observe are consistent with the hypothesis that time spent with outsiders is on average less beneficial to the firm and more beneficial to the CEO and that the CEO spends more time with outsiders when
governance is poor."   The research findings suggest that CEOs perhaps spend too much time dealing with external constituencies at times, and they may overdo their role as the "public face of the firm."   Now one must ask, "Won't it hurt the firm if the CEO isn't out there interfacing with these constituents?"  Perhaps one answer is that the CEO doesn't need to take on this role by himself or herself.   CEOs might consider sharing the responsibility for this outreach more broadly, thereby preserving their time so as to focus appropriately on internal activities. 

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