Many companies aren’t prepared to replace underperforming CEOs • Hacker News Board

Re: Many companies aren’t prepared to replace underperforming CEOs

#231

Post by mijamo » Sat, Nov 05, 2022, 7:50 AM UTC

xwolfi wrote: post #208

bluefirebrand wrote: post #175

Earlier quoted context omitted.

I have to wonder if it should be considered a legal conflict of interest for a CEO to sit on the board at all, forget being chairman. The powerful really love rigging stuff in their favor huh

It is know since companies have existed that this is indeed bad corporate governance. The CEO should be firable at the leisure of the board, and the board at the leisure of the shareholders. What seems to happen often is blurried lines: the ceo founder is majority shareholder, the board is his family, friends and paid lawyers, the shareholders are asleep at the wheel as long as some profits rain in, the regulator fin…

Actually this isn't the whole truth. There is a substantial body of literature around the effect of merging both positions or not and it is not really conclusive in any direction.

You mention Europe but for instance in France it has been a corporate tradition too have both merged and separation has statistically lead to a significant underperformance.

FYI it is called the agency vs stewardship theories and currently it seems like a academically the stewardship is slightly favored.

Re: Many companies aren’t prepared to replace underperforming CEOs

#232

Post by astrange » Sat, Nov 05, 2022, 8:05 AM UTC

kennend3 wrote: post #96

kranke155 wrote: post #19

Earlier quoted context omitted.

It clearly was. It was a high performing organisation with few peers in corporate history. Apple under Jobs was perhaps one of the biggest value creating organisations in our recent memory, if not the most value creating organisation in the last 20/30 years. So whatever he did, it worked brilliantly. The only analogue we have now is SpaceX imo. Tesla, if they crack self driving, maybe.

You have conveniently forgotten a serious part of apple's history so let me remind you. " Steve Jobs and Bill Gates’ rivalrous friendship is the stuff of tech lore. The most poignant moment of that fraught relationship happened 20 years ago. In August of 1997, Gates stepped in and saved Apple, which, at the time, was on the brink of bankruptcy. “Bill, thank you. The world’s a better place,” Jobs told Gates after the…

That failure was under the last guy. He didn’t work there yet.

Wasn’t an investment of any value either, it’s the message that mattered.

Re: Many companies aren’t prepared to replace underperforming CEOs

#233

Post by monkeydust » Sat, Nov 05, 2022, 8:23 AM UTC

astura wrote: post #211

kibwen wrote: post #128

Earlier quoted context omitted.

Employee-owned companies aren't entirely unheard-of in the US. Legally, they're structured as companies where employees own more than 50% of its shares via an ESOP: https://en.wikipedia.org/wiki/Employee_stock_ownership

I cannot stress this enough - employee-owned companies are still dictatorships, the employees being shareholders doesn't change that at all. Employees get zero, and I mean ZERO, say over day-to-day operations or even major decisions. The SOLE difference between a non-employee owned company and an employee owned company is who the shareholders are. Source: personal experience working at multiple employee owned compani…

So what's a viable framework where employees can get an official say?

My mind went to DAOs where employees all allocated governance tokens and anyone can propose a new idea and others can use their tokens to vote.

Re: Many companies aren’t prepared to replace underperforming CEOs

#234

Post by z3ugma » Sat, Nov 05, 2022, 9:09 AM UTC

monkeydust wrote: post #233

astura wrote: post #211

Earlier quoted context omitted.

I cannot stress this enough - employee-owned companies are still dictatorships, the employees being shareholders doesn't change that at all. Employees get zero, and I mean ZERO, say over day-to-day operations or even major decisions. The SOLE difference between a non-employee owned company and an employee owned company is who the shareholders are. Source: personal experience working at multiple employee owned compani…

So what's a viable framework where employees can get an official say? My mind went to DAOs where employees all allocated governance tokens and anyone can propose a new idea and others can use their tokens to vote.

Check out sociocracy. There is overhead cost to operating this way though.

In your model, what happens when you get outvoted?

Re: Many companies aren’t prepared to replace underperforming CEOs

#235

Post by astura » Sat, Nov 05, 2022, 11:14 AM UTC

monkeydust wrote: post #233

astura wrote: post #211

Earlier quoted context omitted.

I cannot stress this enough - employee-owned companies are still dictatorships, the employees being shareholders doesn't change that at all. Employees get zero, and I mean ZERO, say over day-to-day operations or even major decisions. The SOLE difference between a non-employee owned company and an employee owned company is who the shareholders are. Source: personal experience working at multiple employee owned compani…

So what's a viable framework where employees can get an official say? My mind went to DAOs where employees all allocated governance tokens and anyone can propose a new idea and others can use their tokens to vote.

Cooperatives

Re: Many companies aren’t prepared to replace underperforming CEOs

#236

Post by pas » Sat, Nov 05, 2022, 12:10 PM UTC

nostrademons wrote: post #150

jandrewrogers wrote: post #120

Earlier quoted context omitted.

> Plenty of middle-managers could do as well as the average CEO. I’ve worked with several CEOs and countless senior executives, both at very large companies and small, who had varying degrees of competency. I don’t think this is generally true. Being successful at that job entails a specialized skill set that is rarely evident in middle management. What you are “managing” at the most senior levels of large organizati…

Relevant though somewhat tongue-in-cheek: https://www.ribbonfarm.com/2017/11/09/ceos-dont-steer/ I think that there are a lot of people that are cut out to be CEO, but most of them are already working as CEO - of a small business, or household, or one-man consultancy. There are very few people that are cut out to be CEO of the particular big corporation that is hiring for CEO . If you take the Ribbonfarm essay at fac…

and for each genuine such personality the board will find a dozen psychologically problematic implicit conman (or conperson) that seems a close enough fit. and these scammers are the very visible symptom that folks talk about usually.

Re: Many companies aren’t prepared to replace underperforming CEOs

#237

Post by pas » Sat, Nov 05, 2022, 12:19 PM UTC

jankcorn wrote: post #217

Having had interactions with board members at 2 Fortune500 companies I worked for, I have pretty much lost faith in the "board members reflect the shareholders and manage the executive team" model. In one case, the board member said that the only material about the company they were ever given was carefully constructed/managed by the CEO/executive team and was not detailed enough to support any critical analysis of e…

for the uninitiated, could you list a few examples when board members (directors) were held responsible? famous court cases?

Re: Many companies aren’t prepared to replace underperforming CEOs

#238

Post by pas » Sat, Nov 05, 2022, 12:33 PM UTC

vba616 wrote: post #223

jyu wrote: post #89

Being CEO is good work if you can get it. Run a company to the ground and receive your golden parachute package for all that hard work.

Suppose you wanted to hire a driver for an armored truck that contains a billion dollars on an average day. What kind of person would you look for and what would you pay them? Would you try to find the most intelligent person, with the best driving skills, who is willing to work for the least pay? Suppose you were interviewing that person, and s/he told you that you were an idiot for hiring the previous driver, who,…

good analogy!

obviously the solution is what organized crime came up with. tie performance to heartbeat of loved ones.

for accountability to work it needs motivationability

important to know whether the job is impossible or not, because if it is you will only ever get desperate unlucky less-than-useful idiots.

and also very big issue is the strength of the causal relationship between quarterly earnings and "job performance" ... hiring miracle workers, like GE did, who will massage the numbers, whatever it takes, will look nice initially, but then the long winter sets in and it turns out it was all theater. (that's when the mob connections come in handy, for exercising that accountability ... and of course these bonus clawbacks are happening, but probably due to the aforementioned causal inference problem they don't do much)

Re: Many companies aren’t prepared to replace underperforming CEOs

#239

Post by indymike » Sat, Nov 05, 2022, 12:56 PM UTC

refurb wrote: post #213

indymike wrote: post #126

Many CEOs have very one-sided contracts that makes firing them expensive. A great number of companies have boards that are highly sympathetic to the CEO which makes it take even more effort. In a lot of cases bigger shareholders referred the CEO to the board when they hired the CEO, so the board members that represent that shareholder's interests are invested in the bad CEO. So, you basically end up having to fire a…

Not only that, but changing CEO's has PR risk. Fire a CEO? Suddenly everyone is going to assume something is really wrong with the company.

> Suddenly everyone is going to assume something is really wrong with the company.

This can work both ways. New management can be a really big boost.

Re: Many companies aren’t prepared to replace underperforming CEOs

#240

Post by RikNieu » Sat, Nov 05, 2022, 1:00 PM UTC

Warren Buffett discussed this in his 2007 letter to shareholders Buffett says that "90% of your job as a director is having the right CEO."

"There is a natural tendency for people with big egos and big motors who get to be CEOs who like to do big things and to become bigger spending other people's money. Normally, when big deals come along [for approval] management has already made the deal anyway, they have investment bankers there that will go through a little ritual - I've never seen one come in and do a presentation which says it's a dumb idea! They know what the answer is supposed to be, and it becomes a little game."