91–100 of 164 posts
Earlier quoted context omitted.
If you have the time and money to spend (or it's otherwise paid-for) and a spot at a top 5 program--why not?
Opportunity cost
In particular, "Elite MBAs did perform relatively well as CEOs in healthcare and consumer staples". Not significant statistically but the reason this is true is because both healthcare and staples (until recently) have had a killer run.
So I don't think share price performance is the best metric but...even then...you would still expect to see something totally different to the actual results. The stuff that looks at the portfolios of bankers is more understandable...but this has been shown elsewhere (generally, poor fund managers do better).
Earlier quoted context omitted.
Except, we've learned via a robust body of research over the last 5 decades that the market is largely efficient. Therefore, a change in share price over time (not measured in quarters, but over 3+ year periods...as was done in this study) is an excellent proxy for change in fundamentals.
The market is going to price in expected change in fundamentals due to the new CEO. They're going to price it in immediately - before the fundamentals actually change. The market does not proxy change in fundamentals. It proxies change in expected future fundamentals. These are different things.
The price at year 1 will be based on the prospect of future earnings. The price at year 3 will still be based on the prospect of future earnings...but with 12 quarters of hard data allowing you to more accurately price in the new CEOs specific strategy and its effects on growth prospects.
That CEO pay increased because of a trend in aligning incentives (the analysis of the CEOs performance says nothing about this).
The article spends no time on this and is at best an ancillary point, it should have started with a general statement of how crazy CEO pay is and if it’s worth it without dealing with the incentive nonsense at the beginning.
Otherwise good article.
Earlier quoted context omitted.
The market is going to price in expected change in fundamentals due to the new CEO. They're going to price it in immediately - before the fundamentals actually change. The market does not proxy change in fundamentals. It proxies change in expected future fundamentals. These are different things.
We could be arguing semantics here, but my point is; the market will of course price in prevailing sentiment at the time, but this will be corrected over the next 3 year of earnings releases whether prospects for future fundamentals have actually improved (hence why the study used 3-6 year time periods). The price at year 1 will be based on the prospect of future earnings. The price at year 3 will still be based on t…
The lead author is a friend of mine. The beautiful thing is that he got an...MBA from Stanford. I’m consistently intrigued by his observations about the world. He doesn’t let his own background get in the way of questioning established wisdom. The fund he runs now is based on a belief that private equity is seriously flawed...which he discovered by working as an analyst for one of the top firms. He hosts a fantastic…
Does anybody know what Figure 2a and 2b are trying to show ?
If the top quartile of performers were consistently the top quartile, then the plots in Fig. 2B would be the same because their performance is persistent over two three-year periods. Same thing can be said of Fig. 2A but with the median.
The simpler and more intuitive way to show this would be a some way to display "skill performance", "chance performance", and "observed performance".
| -------------- | Skilled | Chance | Observed |
|---------------+------+-----+-------|
| Median------ | 50% | 25% | 25% |
| Top quartile | 25% | 6.25% | 7% |
This is great work. It's a real job gathering and analysing all that CEO performance data. My guess is that most people were suspecting this anyway. The fact is the CEO is there for a few years making a few key decisions, a large company is like an oil tanker, and markets are quite hard to predict. Taleb has cooked a fair bit of soup on the fooled by randomness idea, but in this case his observations are correct. It…
To play devil's advocate: The primary function of a manager is to say "No". As one goes higher and higher up the hierarchy, one has to say "No" to pushier and pushier subordinates, and the cost of every misplaced "Yes" is higher and higher. While leaders just under the CEO may understand the firm situation just fine, they may also be unable to say "No" to enough bad ideas for a myriad reasons, including lack of polit…
This is great work. It's a real job gathering and analysing all that CEO performance data. My guess is that most people were suspecting this anyway. The fact is the CEO is there for a few years making a few key decisions, a large company is like an oil tanker, and markets are quite hard to predict. Taleb has cooked a fair bit of soup on the fooled by randomness idea, but in this case his observations are correct. It…
The CEO's decisions matter. For the most obvious example, see Apple. A series of CEOs drove Apple to near bankruptcy, then Jobs became CEO. With the same employees, plant, equipment, culture, etc., he turned it into the largest company in the world. He did something similar to Pixar. Microsoft is another example. Same company, same staff, same products, 3 CEOs, stark difference in results.
I think anyone would agree that there are plenty of CEOs who happened to get their jobs just as pipelines come through, the economy rebalances in their favor, long-term HRD plans come to fruition etc. but they get all the credit anyway