Investors often pay lots of attention to who a company’s CEOs is, or should be. But MarketWatch’s Mark Hulbert says they are probably wasting their time.
“In fact, according to Rakesh Khurana, a professor of leadership development at Harvard Business School, a corporation’s internal culture ‘exerts a far greater longer-term influence on the company’s success’ than a CEO,” Hulbert writes. “’Large-scale statistical studies have failed to find any direct causal link between CEOs and firm performance,’ he told me.”
Hulbert says that culture is difficult to quantify. “But one academic study found that a good measure of corporate culture is responsiveness to shareholder concerns — as measured by the presence or absence of governance structures that enable or prevent shareholders to effect change,” he writes. “That study, by Andrew Metrick of Yale University, Paul Gompers of Harvard University and Joy Ishii of Stanford University, found that the shares of companies that were most responsive to shareholders gained an average of 8.5% more per year than companies that were the least responsive.”