Tuesday, June 30, 2015

Perils of a Superstar CEO

Matt Palmquist writes this week for Strategy+Business about the fascinating new research conducted by Stanford University’s Elizabeth Blankespoor and Ed deHaan.  They examined the impact of CEO promotion.  By that, they mean the extent to which companies publicize their CEO in various ways, such as by providing quotes and access to journalists.   These scholars examined over one-half of a million press releases issued by 1,500 companies over a ten-year period.  What did they find?  Here's Palmquist's summary:

Large companies that actively promoted their chief executives in communications with journalists saw a more than threefold increase in the media coverage of their CEOs, the authors found. However, companies that went overboard in publicizing their chief executives eventually experienced a sharp decline in long-term performance, largely because their CEOs appeared so comfortable and entrenched in their role that they failed to seek novel solutions or think beyond the status quo... Those who push themselves into the limelight too aggressively may create unrealistic expectations in the minds of shareholders or become burdened by their own celebrity, unwilling to make risky or unconventional moves because of how highly they value their own reputation.

We all have heard the adage, "Don't believe your own press."  Well, now we have a study that confirms the perils of falling in love with all those splashy headlines.   Of course, the study does not provide the evidence of direct link between publicity and negative performance.  It offers a few hypotheses, as does Palmquist in his article about the research.  The comments above seem plausible.  CEOs can become entrenched and overly comfortable, fail to see new ideas, and become burdened with unrealistic expectations. 

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