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I would postulate that 3) is indistinguishable from doing a great job as CEO the vast majority of the time. Only very occasionally are the personal interests of
by adamlett 6y ago
I would postulate that 3) is indistinguishable from doing a great job as CEO the vast majority of the time. Only very occasionally are the personal interests of the CEO in conflict with those of the company and its owners.
Most CEOs can recognize that a business decision can be absolutely the right thing to do for the business and not make that decision if it either would cost them (1) their standing with shareholders (2) their annual bonus (3) their standing with the board (4) their standing with internal constituents.
Again, you'll have to provide some compelling evidence or some very good arguments to convince me that the cases where the wishes of the board and/or the shareholders are in conflict with what is best for the business, are anything other than a rarity.
The key skill CEOs need to be CEOs can be summarized as: "How to become a CEO."
That's a very cynical and reductionist view. I prefer to think in terms of peacetime and wartime generals. In peacetime (ie. when the market forces make it difficult to fail for example because you have a monopoly), I think it's probably true that a very important requirement for rising to the top, is political skill. In a wartime, ie. in a highly competitive market, good business people rise to the top.
You fail to mention the 4th possibility (alluded to in the article): Market conditions sometimes change and the CEO is left with no good options. If you had a wildly successful business selling abacuses and someone suddenly introduces a low cost electronic calculator, there's probably not much you can do a CEO to prevent you market from shrinking. Of course you could try to change your business from making abacuses to making calculators in an attempt to hang on to your customers, but there's is also nothing about manufacturing abacuses that translates into creating electronic calculators, so the chances of that succeeding are slim to none.
- wegs 6y agoYour postulate is generally correct on a quarterly time span. It's generally incorrect on a 5-year time-span. Good examples are Carly Fiorina gutting HP in ways which weren't immediately externally visible, or Bezos / Jobs pursuing tactics which took years to show value. Key differences between the Board / shareholders and the CEO include: (1) Amount of time available. Boards meet a few times, and it's exceptionally hard to get buy-in for something which doesn't have a concise executive summary. Shareholders have even less time. (2) Insider information. Shareholders (and, to some extent, Boards) have far less inside information than the CEO. If you'd like good evidence, the book "The Dictator's Handbook" builds a pretty good case that mirrors my experience operating at both executive and board levels. It's not a complete explanation, but I think it accounts for 50% of the types of dynamics described. If full-length academic texts aren't your thing, CGP Grey has a nice summary on Youtube too: https://www.youtube.com/watch?v=rStL7niR7gs https://www.youtube.com/watch?v=rStL7niR7gs >> The key skill CEOs need to be CEOs can be summarized as: "How to become a CEO." > That's a very cynical and reductionist view It may be cynical, but it mirrors my experience. It's definitely not reductionist. "How to become a CEO." is an incredible complex, intertwined set of skills. Some of those skills include effectively leading companies, but others do not.