Sunday, 28 October 2007

Researching the CEO´s swimming pool

To inform their strategic campaigns, unions are increasingly doing research on companies and their key players. Of the researchers of the Justice for Janitors campaign, it has been said that the Harvard Business Review was among their most important sources of information.
Today, the internet offers new opportunities to collect information. Business scholars have used online databases to find out the size of CEOs’ homes; and aerial photos available on the internet to find swimming pools, tennis courts, boathouses and other amenities. “One such photo, of the home of Limited Brands Inc. CEO Leslie Wexner, clearly showed an equestrian ring”, according to a report in the Wall Street Journal.
Of course, this research was not carried out with the intention of helping unions. It is a response to the claim of CEOs that they deserve generous remunerations because they are vital for their businesses' success. “If their performance is so vital, the researchers say, investors should want to know anything that could affect it”.
Researchers found that stock performance tends to deteriorate after a CEO bought or built an extremely large or costly estate; that narcissistic managers - the ones with large photos of themselves in annual reports - tend to take greater risks; and that profits decrease by an average 21% after a CEO’s child dies. It has been suggested that future research might look into the influence of ‘trophy wives’ on business performance.
While CEO’s might not be happy with scholars’ interest in their personal life, they could argue that the outcomes support their claim that their performance does indeed matter for business performance.
WSJ article by Mark Maremont (a Dutch translation appeared in yesterday’s NRC Handelsblad). Research paper on CEO home purchases (pdf)

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