Do Family Problems of Leaders Affect Company Performance?

“The mediocre teacher tells. The good teacher explains. The superior teacher demonstrates. The great teacher inspires.”

William A. Ward

A recent study suggests that there is a statistically significant link between CEO family deaths and the companies’ profitability over a decade ((Bennedsen, M., Perez-Ganzalez, F. & Wolfsenzon, D. (2007) Do CEO’s Matter?)). These researcher identified 6,753 deaths occuring to CEOs and family members–1,015 corresponded to CEOs, 282 to children, 733 to partners/spouses, 1,364 to in-laws and 3,061 to parents. A link between CEO family deaths and significant economic decline of the company (operating returns on assets) was statistically significant. The biggest effects were cases where the CEO had only a single child and the smallest effects were deaths of in-laws.

Are Leaders Who Spend for Luxury Good for Shareholders?

How does the personal spending of CEOs (real estate in particular) affect the economic performance of a company? Professors David Yermack and Crocker Liu studied major real estate purchases of just about every top executive in the Standard & Poor’s 500 index ((Liu, C. & Yermack, D (2007). Where are the shareholder’s mansions? CEO’s home purchases, stock sales and subsequent company performance)). They found pretty convincing statistical evidence that the financial performance of companies decreases when CEOs purchase large homes and real estate. They suggest that these purchases are related to “executive entrenchment”and “foreshadowing poor future stock performance.” The good news is that they didn’t find that buying a house near a golf course or the water have a statistically significant impact on financial performance.

Do MBA Professors Make Good Leaders?

Do MBA professors who teach about leadership and organizational development really understand how to manage talent in organizations? Sure, some consult and most publish but are they really a role model for leadership–or should they be?

A new study by Jiang & Murphy analyzed the performance of 215 executives who were former business school professors ((Jiang, B. & Murphy, P. (2007). Do business school professors make good executive managers?. The Academy of Management Perspectives. 21, 29-50)). Their results suggested that companies with former business school professors now as executives demonstrated significantly higher financial performance than non-former professors as executives. They didn’t find any differences in company performance between executives who were professors in the highest ranked business schools compared to those in non-ranked schools.

I’m not sure what you can do to prevent family health problems of senior leaders but apparently you can impact the “bottom line” by recruiting relatively lower paid management faculty and putting them up in corporate apartments at least during their first 18 months of on-boarding……Be well…..

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Ken Nowack

Kenneth Nowack, Ph.D. is a licensed psychologist (PSY13758) and President & Chief Research Officer/Co-Founder of Envisia Learning, is a member of the Consortium for Research on Emotional Intelligence in Organizations. Ken also serves as the Associate Editor of Consulting Psychology Journal: Practice and Research. His recent book Clueless: Coaching People Who Just Don’t Get It is available for free for a limited time by signing up for free blog updates (Learn more at our website)