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Why C.E.O.s are getting fired more
- kogepathic 10y agoPerhaps this is a contributing factor to the insane compensation American CEOs receive? The new CEO refuses to work for less than the old one, and the company has to offer the new person an incentive to join as CEO. Couple this to the fact that CEOs are fired more frequently, and you get to the number CEOs are paid now?
- cmdrfred 10y agoSounds like we have a CEO shortage. We should H1B some over here ASAP.
- deleted 10y ago[deleted]
- harryh 10y agoYou sound like you're joking but it's true. There are a shockingly small number of people who are really capable of being a CEO of a large (or even medium sized company) and doing it well. It's an insanely hard job. And two of the biggest tech CEOs (Sundar Pichai of Google & Satya Nadella of Microsoft) are immigrants.
- cmdrfred 10y agoGoing solely off the data I have[0] that seems to be untrue. Do you have some other sources or is this more "common knowledge" from the corporate sector? [0]https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2837504 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2837504
- kesselvon 10y agoThe people that parrot this line are usually CEO's themselves, or people angling for the job at some point. I am amused about how CEOs take credit for successes but failures are always driven by external factors out of their control. The reality is that CEOs are as good as their underlings, as they do all the real work and advise the CEO. For that matter, CEOs probably shouldn't be pulling 100x earning multiples compared to their 'normally' paid employees.
- hnal943 10y agoPeople with your line of thinking are usually IC's who discount how difficult leadership is. How do you affect change without having to do everything yourself? That's a valuable skill.
- blocktuw 10y ago"Do this or you're fired" will typically get those below you to produce the change you desire. Not sure how you can put that much value on a skill inherit to a hierarchical organization. If the organization was flat, then I would concede your point that affecting change without any seniority would be difficult and worth extra compensation. A true leader would need to be persuasive, knowledgeable and visionary. What you describe as "leadership" is people doing their job.
- harryh 10y ago"Do this or you're fired" will typically get those below you to produce the change you desire. LOL. If this were true it would be so much easier. But talented employees, who can easily get another job across the street, are more likely to laugh at you then do what you want if you talk to them like that.
- cmdrfred 10y ago"Robert we have to complete this report by Thursday" == "Robert work overtime to complete this report by Thursday, or you will be fired" So the main skill of a CEO is he can ask nicely?
- harryh 10y ago(We've gotten a bit off topic this deep in the thread. At this point we're really just talking about general management skills which really isn't a big thing for a CEO of any reasonably sized company. That being said....) Robert: Sorry I can't work late this week. It's my kid's birthday tomorrow.
- wott 10y agoNonsense. It is much more demanding, involving and decisive to be CEO of a small company. In a large company, a CEO is merely a spokesperson for his advisors.
- hx87 10y ago> There are a shockingly small number of people who are really capable of being a CEO of a large (or even medium sized company) and doing it well. How much of this is due to genetics and prenatal environment and how much to education and life experiences? If the former dominates there isn't much we can do for now, but if it's the latter, there's gotta be a massive market for CEO-schools, both public and private. Personally, I suspect that the limiting factor is social capital--most CEOs get hired because they're known among people connected to the board, and it's hard to get known. I'm not sure what the solution in this case is though, except maybe more residential desegregation by class and ethnicity.
- hockley 10y agoDon't confuse being known with being trusted. One is a prerequisite for the other, but they are not the same thing. It's not so much who you know as it is who trusts you.
- hx87 10y agoThat's certainly true. I wonder if there is a way to increase the number of people who are trustworthy and seen as trustworthy in a given social circle?
- GVIrish 10y agoAnd the new CEO requires an even bigger golden parachute in the likely event of his/her failure.
- hockley 10y agoI think the large compensation helps the CEO act on what he/she feels is in the best interest of the company. When you make enough in one year to retire, you can make decisions with a lot more courage.
- CamelCaseName 10y agoIt all makes sense now. The reason we have wireless iPhone earbuds is because Tim Cook gets paid a lot.
- totalZero 10y agoCEOs have long been fall guys. They go into the job with an expectation that if anything goes wrong, they will need to fall on their own sword to absorb accountability. That's why termination packages are stupidly generous... leaving the job is often part of doing the job.
- chiph 10y agoThe old joke about "Prepare three envelopes" has a lot of truth to it.
- lordnacho 10y agoIt's the same short-termism you see in the sports world. Every season starting around now, the top clubs in Europe will start to fire managers who aren't performing well. Despite the fact that a soccer team is something that has a bit of momentum and can't be changed all that quickly. You then hire a new guy, and you have to pay a premium. For one, there are fewer people available because you're in a hurry. For another, any new guy will see there's a risk of getting canned, so he'll want more money to compensate. And finally, you'll have painted yourself into a corner because you need someone who is perceived to be better than the guy you just canned. - The board members live off being board members. So just like analysts at banks, they herd together. Nobody is going to stick their head out on a candidate who is not like what they think everyone would want. - There's an illusion of control. The idea that you can change outcomes predictably is a big problem. This guy will turn around sales. That guy is better with people. The reality is such judgements are quite blurry and likely to be spectral rather than binary. And a lot depends on environment. - Desperation for action. If things are going badly, something must be done. This is something, so it must be done. (Yes Minister). This is another area where an understanding of statistics would help. Your team/company's losing streak is utterly natural. Replacing the guy at the helm when you get a streak is just likely to cause the next guy to get undeserved credit (which reinforces the cycle).
- deleted 10y ago[deleted]
- Thlom 10y agoPlus you usually have to pay the old manager for his full contract.
- ythl 10y ago> Desperation for action. If things are going badly, something must be done. This is something, so it must be done. I see this in politics a lot. If things are going badly (another "mass shooting" happens), something must be done. Even if the solution is crap (ban "assault weapons") it is something, so it must be done.
- 10y ago
- user5994461 10y agoI personally don't get the point of having the CEO in most big companies. Noone knows who it is. Noone has ever heard anything from him. Noone would even recognize him as CEO if he messaged or talked to them.
- Forge36 10y agoHow big are you talking? I know my CEO. But at 10k we aren't "big" compared to Microsoft or Apple.
- theandrewbailey 10y agoI worked at two companies not even half that size, and I don't think I ever saw CEOs. I don't remember any names, and I don't think I ever knew them.
- saiya-jin 10y agoI presume he meant personally, anybody can look into internal HR app (most companies have those, including photos)
- hnal943 10y agobut you know the CEOs for Microsoft and Apple and you don't even work there. The bigger the company, the more visible the CEO, not less.
- nickpsecurity 10y agoIt's opposite in my company. It's a Fortune 100 company where almost nobody knows the CEO since we never see him, rarely hear from him, and don't care since he has little impact. The workers, from offices to production, run our company with senior management just taking credit for or higher pay from all that. CEO showed up once for some red carpet treatment, speeches, and food but that's it.
- jonwachob91 10y agoThen why not leave? If you are really producing the effort that makes the company successful I'm sure you could easily get a job somewhere else that'll pay you better and give you better support from up top...
- myf01d 10y agoThe funny thing is that the growth or decline of a big company rarely depends on the performance of the CEO who gets paid by millions at most cases. It mostly depends on the current status of the market.
- harryh 10y agoPart of the job of a CEO is to make sure a company is executing in the right market.
- DrNuke 10y agoNo AI / bot CEOs yet? Come on...
- hnal943 10y agoSome CEOs report to a bot: http://observer.com/2014/05/v-c-firm-names-robot-to-board-of-directors/ http://observer.com/2014/05/v-c-firm-names-robot-to-board-of...
- the_duke 10y agoWh
- mathattack 10y agoThey cited several academic studies on shrinking tenure and increased likelihood of CEOs being let go for performance. The New Yorker isn't one to use footnotes.
- qwrusz 10y agoThe real news should be Why CEOs Aren't Being Fired Fast Enough When bad CEOs do get fired, you often hear 'finally, what took them so long to rid of that guy' and not 'aww, guy just got there, the board should have given him a longer chance'[1]. The upswing in stock price following a forced CEO turnover may be seen as corroborating this sentiment. Why are poorly performing CEOs not being replaced quicker when corporate boards with a fiduciary responsibility have more than enough evidence he/she is not the right person for the job?... [1] Ron Johnson is the only recent example I can remember where I heard maybe a couple people say that felt fast.
- Bartweiss 10y agoI don't think we should see those things as mutually exclusive. I might combine the arguments as "CEOs should be fired for personal performance, not corporate or economic upheavals." Stumpf left Wells Fargo over a debacle he neither created nor directly managed. Certainly, over something less visible and attributable than Cordiner at G.E. There's no particular reason to think that the new CEO is more qualified to reform incentive structures and security precautions than he is, so it was just a changing of the guard to show that something was being done. Meanwhile someone like Ballmer was ousted about a decade after the industry had decided it was necessary. I knew college students who swore they wouldn't work at Microsoft until Ballmer left, and that was years before he finally did. Even if you feel he did a good job, it's pretty undeniable that his presence was toxic to Microsoft's reputation and ability to recruit. And yet he only left when Microsoft's problems became undeniable and 'new blood' was needed to buoy the share price. To me, the most consistent narrative is that boards fire CEOs when a problem becomes so public that they need someone to hold responsible. That means both ignoring incompetence if things are running uneventfully, and ignoring competence (or reasonable ignorance) when a scandal comes through.
- r00fus 10y ago> Stumpf left Wells Fargo over a debacle he neither created nor directly managed. Cite needed. Right now it's completely not clear, except that widespread, clearly illegal activity happenend on his watch. I think it's ridiculous to compare Stumpf with Ballmer who simply wasn't as good as he could have been - he increased profits during his tenure, and to my knowledge, did not preside over shady activity (in contrast to Bill Gates who was happy to "knife the baby" of his competitors).
- SamUK96 10y agoI agree with other posts. It's the increasing prevalence of short-termism. Most companies in the world now are going through a big consolidation process on a scale unheard of in the past, in preparation for when things go very bad in the near future due to several accumulating factors. This means is that companies are increasingly designing themselves to be sold; to be valued higher, so that when they get bought by the biggies, the 'Boys Club' (Seniors, Chiefs, etc.) get more money in the end. This means companies are acting more for the quick sell rather than having any kind of long-term plan for the future, and this means that a C.E.O.'s world view and opinion and plan for the company quickly become outdated and left behind, in favour for short-term company valuation increases. Also, one way of increasing your company's value is changing C.E.O.'s more often, since it shows your company is "pro-active" and "progressive", and gets you in the news a lot.
- OliverJones 10y agoThis seems to be a return to accountability from the excesses of the oughts (the 2000s). It's guys like Ken Lay (Enron) and Rich McGinn (Lucent), not to mention John Stumpf (Wells Fargo) who set up the expectation that executives should be freewheeling, and that living high was the best way to signal to shareholders that the company was in good shape. The days when the CEO drove himself to work in a Buick and showed up in a rumpled suit just off the red-eye at customer offices when there were problems delivering value seemed to have faded away. Anybody pulling down a seven-figure salary ought to be wise enough to salt a lot of it away. Baseball players and bigshot executives are both out there on the firing line. When they stop delivering their expected value, they should expect to be cut. Reversion to the mean makes this more likely than not for superstars. It's entirely positive that shareholders are paying attention to one of the biggest expense items - exec compensation - in their companies' budgets. It would help if shareholders were better at understanding long-term strategies. A good CEO (Jobs, Apple; Musk, Tesla; Welch, GE) is capable of persuading them.
- yuhong 10y agoI really wish the restrictions can be reduced or removed so board of directors (like @pmarca) can tweet more on public companies.
- fourthark 10y agoIf there were fairness in the world, bad CEOs would get demoted instead of fired. Make them clean up the mess they made.