CEO performance problems – Failure to address key issues harms company prospects

The CEO (chief executive officer) is the most influential figure in a company: a bad one can wreck a company; a good one makes sound business decisions, propelling their company to success. Yet there are several significant problems with how leading companies treat the role. Not only are performance problems common, but too much emphasis is also placed on the CEO. Too often companies suffer from problems relating to CEOs which are avoidable. Correcting issues will pay dividends over the long-term.

Key Questions Answered

– How do scandals happen under powerful CEOs?

– How can entrepreneurs become successful CEOs?

– Do CEOs have too much influence?

– Why should companies have CEO succession plans?

Scope

– Explores the validity of CEO pay

– Analyses the transition from founder to CEO

– Looks at the power wielded by CEOs

– Assesses how scandals can be traced back to CEOs

Reasons to buy

- Despite lucrative remuneration packages, experience and extensive range of power, several CEOs of major businesses have missed brewing scandal - indeed, in many instances the management philosophy of a CEO has been the root cause of scandal.

- Blind faith in the decision-making abilities of CEOs represents a significant problem for the future prosperity of many companies. Not only that, but stock markets can share faith, inciting jumpy behavior regarding the value of a firm depending on the likelihood of a CEO departing or staying.

- The problems of succession planning can strike even very large and successful companies. Samsung has been thrust into a power structure crisis following the imprisonment of Mr. Lee, the heir to the Samsung business empire. With the current CEO soon to be gone following a high-profile scandal, power vacuums could soon open.

Table of Contents

Table of Contents

Overview 2

Catalyst 2

Summary 2

Despite power, CEOs persistently miss scandals 6

Volkswagen scandal reveals shortcomings of CEO system in major organizations 6

Wells Fargo demonstrates dangers of CEOs imposing poor working culture on companies 7

”˜Great man of history’ approach does not work on CEOs 9

Blind faith in CEOs does not help companies to perform better 9

Illusions about transformative CEOs are unhelpful to company performance 10

Performance of CEOs can only be assessed years after major business decisions are taken 10

Succession poses serious difficulties for major businesses 12

Big changes at Samsung following imprisonment of Lee Jae-yong 12

Malaysian tycoons strike problems in handing over power to new generation 13

Succession planning is lacking in many large businesses, storing up future problems 14

CEO pay - validity arguments rumble onwards 16

Rewarding spectacular failures undermines belief in CEO worth to major companies 16

High pay can influence CEO decision making, causing problems to large businesses 17

Despite holding unfashionable views, advocates claim high pay improves company performance 18

Entrepreneurs have history of not making good CEOs 19

Entrepreneurs frequently fail transition from head of start-up to CEO 19

Founding CEOs can accrue too much power in attempt to solidify control of companies 20

Many changes are required for successful transformation from entrepreneur to CEO 20

Conclusions 21

Problems associated with CEOs need to be addressed to improve business performance 21

Appendix 22

Sources 22

Further Reading 22

Ask the analyst 23

About MarketLine 23

Disclaimer 23

List of Figures

List of Figures

Figure 1: Volkswagen share price January 2012 – October 2017 (EUR) 6

Figure 2: Claytonz Wells Fargo cartoon 8

Figure 3: Lou Gerstner, former CEO of IBM 9

Figure 4: Apple share price October 2011 – October 2017 ($) 10

Figure 5: Lee Jae-yong 12

Figure 6: Teh Hong Piow 13

Figure 7: Julius Baer Group share price ($) 15

Figure 8: CEO-worker pay ratio, based on 2012 figures 17

Figure 9: Founder-CEO Succession breakdown 19

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