Started reading a very cool book, sharing my notes here.
Boards think outside candidates are better than home-grown ones.
CEO selection is a mystery similar to the Pope selection.
Instead of looking for a person with the relevant experience, Boards are searching for someone with a “charisma” (that’s the whole topic of the book)
[MK: if I hear the “think outside the box” term ever again, I’ll explode]
Expectations of an external CEO: the ability to motivate and inspire employees (so far so good) and instil confidence in investors and analysts (not a con game, no way).
The realities of the 21st century are that investors (being more concentrated) play a more active role in the company management (not governance!) than before. The reason? If the company underperforms – there’s no market for their shares.
The pressure by the shareholders on the Boards to hold the CEO accountable thus disrupting the historically cosy relationship between the CEO and the Board.
When the company underperforms, the Board replaces the CEO with an outsider without the taint of the organisational history. A star CEO can give boost to share price.
Having prestige as #1 job profile requirement is a losing proposition.
The external CEO search is secretive (not to spook analysts who can drive the stock price down) and is focused on the already small pool of high-profile candidates; “charisma” and “leadership” are prioritised over the concrete knowledge of the firm and its problems.
This brings a different face, but the “more of the same” CEO.
Exorbitant CEO compensation is linked to unrealistic Board expectations (because, of course, all the firm needs to succeed is a new CEO – the corporate saviour).
Once the incoming CEO is finally thrown under the bus with ever-decreasing (but still lucrative) golden parachute, the search starts again; the long-term goals being sacrificed for short-term share price increases and a bunch of knowledgeable senior managers.
[MK: Board’s betrayal is not uncommon, but for ousted CEOs/COOs/CFOs this is not the end of career.]
The Trusting Leadership Style
[MK: this is the style I’ve practiced for as long as I remember myself]
In a nutshell, put trust in good people and remove obstacles for them to do their job effectively.
Unfortunately, this luck runs only for as long as you don’t do lots of fast/large acquisitions where the other firm’s culture [in this example – more command and control] can overwhelm yours.