Of Barron's 30 most respected CEOs, only two boosted shareholder value
Mar 21st 2009 8:50AM
Updated Dec 4th 2009 11:23AM
Ever since early 2001, it seems that our culture has prided itself on rewarding failure (Mission Accomplished, anyone?). This idea seems alive and well after reading Barron's [subscription required] list of the 30 most respected CEOs, which appears to have been selected through a vote by stock analysts. But those analysts must be basing their votes on how much investment banking business the companies throw to the analysts' employers. For shareholders, these 30 CEOs have delivered massive losses in the last year. Only two of the 30 -- Genentech (DNA) and Family Dollar (FDO) -- actually boosted their stock price in 2008.
I am pretty sure that investors do not buy stocks with the idea of losing money. That's why it seems so odd that Barron's chose to celebrate 28 CEOs who destroyed shareholder value in 2008. To be fair, 19 of these 28 CEOs destroyed shareholder value less aggressively than the S&P 500, which fell 44.8% -- but for people seeking to increase their nest eggs, the 31.8% average rate of shareholder value destruction for its 30 Kings of the Jungle is scant comfort.
Barron's praise of these CEOs seems to come from the same vein of thinking that grants $165 million in bonuses to the individuals that made the bad bets that caused American International Group (AIG) to lose $99 billion in 2008. It is so obvious that it scarcely needs to be said -- good performance for investors means increasing shareholder value. For Barron's to lavish praise on CEOs who destroyed value at a 31.8% rate is another example of the culture that either does not understand that basic idea or just thinks it's good to reward failure.Unfortunately, as long as we put such a high value on failure, people will keep failing.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He owns AIG shares and has no financial interest in the other securities mentioned.