Archive for May 31st, 2006

Responsibility Trumps All Else

31st May
2006
written by Dr. Leslie Gaines-Ross

WSJ Columnist James Stewart who also writes for Smart Money had a few choice words to say today (31 May 2006) about how he picks stocks:

"The Enron story is a sobering reminder that management integrity is the foundation of financial success. Since the Enron fraud emerged, I have moved swiftly to sell stocks in companies where top management is implicated in wrongdoing, and especially where they refuse to accept responsibility. I'll continue to recommend that you do the same."

When it comes to CEO reputation, ethical conduct is almost always at the top. Whereas years ago integrity ranked lower in terms of what drives a CEO reputation, today it is the number one factor. In Europe, integrity does not usually rank as high as it does in the U.S. because ethical CEO behavior is expected. European companies have recently had their own scandals leading me to believe that integrity will soon top their charts too.

Stewart's comment about accepting responsibility also rings true. CEOs are ultimately held responsible for company behavior. Accountability is the watchword for the times.
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New CEO Turnover Record

31st May
2006
written by Dr. Leslie Gaines-Ross

As an observer of CEO departures for many years now, the new 2005 Booz Allen Hamilton study on CEO succession provides several illluminating trends. The survey is now in its fifth year and always provides new insights and patterns:

* More than one in seven of the world's largest companies changed leadership in 2005
* Four times as many of the world's top CEOs were forced out in 2005 vs 1995
* Outsider CEOs do not perform as well as insider CEOs (they start out well and lose their sizzle by year five)

As the report's authors state: "Chief executives who can produce results are in greater demand than ever before." That partially explains why boards are willing to give CEOs high compensation packages to attract and keep them from jumping to another company (apparently a new trend too).

The talent wars are back.
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