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CEOs matter because, as Warren Buffett said in one of his annual letters: If a company generates, say, 10% free cash flow per year and that money is retained, a
by MikeCapone 15y ago
CEOs matter because, as Warren Buffett said in one of his annual letters: If a company generates, say, 10% free cash flow per year and that money is retained, after only a few years the CEO will have been responsible for the allocation of the equivalent of the company's entire equity. Doing a good job there makes all the difference in the world, and sadly, good capital allocators are rare.
Most CEOs are probably worth a lot less than what they are paid, but some are definitely worth paying up for.
- Hyena 15y agoAssuming the CEO is the one responsible for that. I mean, that's just this huge assumption.
- MikeCapone 15y agoEven if he hires other people to do it, he is ultimately responsible for it and must know what he's doing, if only to hire the right people and fire them if they don't do the job. It's not something you can truly delegate and wash your hands off from.. Just like how the CEO is ultimately the real 'chief risk officer' in a company and can't delegate managing risk to someone else.
- Hyena 15y agoI don't find this to be a meaningful reply. Hiring people is important, sure. So is maintaining cash flow. So is accounting. So is marketing. Etc. But all these things are only important because. The CEO is the head of because; if that's not what he's actually head of, he's doing it wrong.
- MikeCapone 15y agoI disagree. The whole point of a business is to use assets to get the best possible returns for shareholders. The CEO is the guy in charge of those assets, and another name for that is capital allocation. It's the top job on the list, basically. It's not just one more thing he does...
- Hyena 15y agoI've already addressed this: http://news.ycombinator.com/item?id=2937832 http://news.ycombinator.com/item?id=2937832