We all know them. We all love or hate them. But, the question is whether or not the celebrity CEO is good or bad for companies. With CEOs-turned-industry-leaders- like Warren Buffett, Steve Jobs, Bill Gates and Steve Balmer (former and current CEO of Microsoft), Martha Stewart, and Larry Ellison - you have larger than life leadership tied to the well being of the company (at least that’s what most people think). Comments from these gentlemen can move markets, similar to the power Alan Greenspan once held. But, there is a lesson to be learned from creating Celebrity CEOs. Companies built around one man (or woman) – no matter the dynamic personality or genius – can put the entire organization at risk, and there are many examples to choose from.
· You need look no further than one of my all-time favorite Celebrity CEOs – Steve Jobs. From his first illness some years ago to today’s “mystery illness,” Apple’s stock price seems to rise and fall based on the health of this gentleman.
· American International Group, a major global insurance company, was headed up by former Celebrity CEO Maurice (Hank) Greenberg for more than four decades. When he “retired” from his post, the public was uncertain about the company’s new leadership and the stock took a momentary dip. His celebrity-dom rubbed off on his sons – Jeffrey W. Greenberg, former celebrity chairman & CEO of Marsh & McLennan Companies, who was publicly ousted from the position; and Evan G. Greenberg, president & CEO of ACE Limited, the lesser known Greenberg.
· Martha Stewart’s drawn out investigation, her time as a jailbird and finally her release made headlines around the world.
· While last month’s downgrade of General Electric from its AAA-rating received lots of attention, Berkshire Hathaway’s similar downgrade was largely ignored. Unlike the ratings downgrade of GE and many other high profile companies (including ExxonMobil, J&J, ADP, and Pfizer), criticism about Warren Buffett’s reign over the company’s investments and acquisitions were looked upon as long-standing concerns tied to the health of the company. Of course, in the case of the Oracle of Omaha’s financial wizardry, the criticism bounced off him like raindrops hitting the curve of a car’s windshield. However, what happens when Buffett decides to retire or hand over the reins to someone else (you never know at his age).
While you want your CEO to be a visionary and stand as the leadership within a company, it’s not always a good idea to put all your eggs in one basket and create only a solitary celebrity spotlight. There are three major issues associated with creating a celebrity leader:
- Larger-than-life expectations can lead to dangerously exaggerated disappointments. Investor confidence is a vital element for public or equity-backed companies, and celebrity CEOs typically cause a roller coaster effect of highs that are too high, and lows that are too low.
- A single misstep by the Celebrity CEO – including personal misfortunesm as per Steve Jobs – can have a disastrous effect on the stock price or even the profits. We won’t even mention the criminal or civil suits some of today’s celebrity CEOs may face in the not-so-distant future.
- Overemphasis on the leader to solve all the company’s problems.
- The importance of well planned, duly announced succession.
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