"White Knight," "Hero," and "Icon" Executives: Are They Worth Their Pay?
New research is throwing light on those we placed on the pedestal of great executives. The spotlight now reveals the value of executives selected because of their "star" qualities.
- A Harvard Business Review article argues that firms appoint charismatic executives because it is believed that a chief executive has a profound impact on performance.
- However, the article's author concludes that 10-25% of performance depends on the economy and 35-45% on the state of the industry.
- In a related paper presented at the Academy of Management, a researcher reported that Boards find that their "white knight" replacement chief executive officers are no better than their predecessors at improving performance. The "hero" makes little difference to profits or the price of shares.
Another study presented at the same meeting of the Academy revealed that in one respect "icons" and pay are connected.
- This study, like others, corroborated no connection to performance.
- It did, however, find that those glowing with charisma received higher total pay than peers at the same level.
Conclusion: Research casts serious doubt on the legendary results of the "White Knight" CEO.
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