Two business school professors have discovered that CEOs who win awards from business magazines tend to underperform their peers.
Elizabeth O’Sullivan from Corporate Board Member writes, “That’s the word from two professors who studied the performance of CEOs presented with accolades by the likes of BusinessWeek, Chief Executive, Forbes, IndustryWeek, Time/CNN, and Electronic Business Magazine. Looking at the period from 1975 to 2002, Ulrike M. Malmendier of the University of California at Berkeley and Geoffrey Tate of UCLA’s Anderson School of Management found that during the three years following an award the companies headed by a significant number of these CEOs experienced a decline in both stock price and earnings. Were the CEOs just victims of weakening economies or beleaguered industries? Not at all. They also performed less well than their non-prizewinning peers in the same businesses.
“Malmendier and Tate cite several contributing factors, including increased demands on the CEOs’ time. Some were pressed to serve as board members, others urged to write books. Meanwhile, they may also have been devoting just a bit more time to golf. Prizewinners, on average, had lower golf handicaps than their awardless counterparts, according to the report.
“Rubbing more salt into the wound, CEOs who won media praise took their press clippings to heart — and the bank. This translated into demands for fatter compensation packages than other companies meted out to CEOs who did a better job — but did it under the media radar.”
Read more here.
