New England Patriots v Philadelphia Eagles
Drew Hallowell, Getty Images Coach Andy Reid, formerly of the Philadelphia Eagles, lost that job after a couple of bad seasons. He's now with the Kansas City Chiefs, but it's an interesting point: If teams are so willing to fire football coaches who fail them, why won't companies do the same with CEOs?
Early September doesn't just mark the end of summer and the start of a new school year. It also means the beginning of the NFL season, and the high hopes, fantasy drafts, and sunny tailgate parties that come along with it.

And while coaches no doubt enjoy some of the same excitement as the fans at that opening kickoff, those gridiron generals also face a special sort of angst. They're about to spend months of working 16-hour days, sleeping in their offices, running drills, reviewing game footage, and devising strategies that they hope will lead to the Lombardi trophy.

But the odds are much higher that they'll end up fired.

Talk About Job Insecurity

Last year, eight out of 32 NFL coaches -- 25 percent -- were sacked after the season ended, and seven were dismissed in each of the previous two years. Three of those fired last year had even led their teams to Super Bowls at one point during their tenure.

In sports, where the mantra is "What have you done for us lately?" sometimes all it takes is a couple of disappointing seasons -- or even one. Andy Reid, Ken Whisenhunt and Lovie Smith were all fired last year despite having taken their teams to a Super Bowl. Reid was dumped by the Philadelphia Eagles despite having led his team to one Super Bowl and five NFC Championship games during his 14-year tenure, a record that would be considered outperforming in any other industry.

Of course, high standards should be expected. The NFL is big business: The combined value of its 32 teams adds up to $37.4 billion, making it the most valuable sports league in the world.

As the effective CEOs of these teams, with full control of on-field operations and part of a tiny inner circle with major input in personnel decisions including drafts, trades, and free-agency signing, the head coaches are in charge of billion-dollar brands and deserve both the blame and the credit.

But compared to the titans of industry in corporate America, the NFL is just a piddling bit player.

Corporate 'Coaches' and Cushy Contracts

If the entire NFL were a publicly traded company, size-wise, it would rank No. 101. For market-watchers, then, the treatment of NFL coaches prompts an interesting question: Why are publicly traded companies so much more lenient on CEOs?

Unlike the NFL, the vast majority of corporate CEOs leave their jobs to retire or pursue other interests. In fact, on average, just 2 percent of CEOs at large corporations are dismissed each year, according a study by Wharton professor Lucian Taylor.

Talk about job security. Compare the tenure of coaches verses corporate heads, and which job would you rather have? Going into this season, the average NFL coach has just 3.2 years at the helm of his current team, compared to 8 years for the average CEO of a company trading on the S&P 500.

Based on the low firing rate and longer stints at the helm, it seems that chief executives at public companies -- the people in charge of the businesses investors entrust hundreds of billions of dollars of their hard-earned savings to -- are judged much more complacently than their counterparts at leading football teams.

Why Are Pink Slips So Rare Wall Street?

Taylor sees the problem as a corporate governance issue, with CEOs becoming too entrenched, which happens when the board of directors sees a personal cost in firing them, and thus shirks its duty to protect shareholder interests.

If boards acted appropriately, Taylor argues, about 13 percent of CEOs would be fired each year.

While poor corporate governance is surely part of the problem, as is the incestuous pool of business leaders who often serve on multiple boards and in leadership positions, problems with performance measurement may be a more direct cause for the lack of CEO firings.

In football, the performance metrics are obvious. You either have a winning record in the regular season, or you don't. You either make the playoffs, or you don't. And if you can't ever manage to win a Super Bowl, the whole world knows it. The success of each season is judged accordingly.

In the corporate world, the metrics are less clear.

The most often cited metric of company/CEO performance is shareholder returns. If your stock outperforms, you're doing a good job; if it doesn't, you're not. But this ignores a number of factors and can encourage short-sighted behavior. It also subjects judgment entirely to market perceptions.

What Do You Have to Do to Get Fired Around Here?

With that in mind, here are a few suggestions for errors that should qualify CEOs for termination. Pink slips should be handed out for those who...

1. Make boneheaded judgment calls

Just as coaches are harangued for bad play calls or poor draft picks, so should CEOs be judged for their decision-making ability, perhaps the most important qualification for a leader. CEOs need to have a vision for the company, and recognize trends ahead of the market.
According to this assessment, Microsoft (MSFT) CEO Steve Ballmer seems to best exemplify a chief executive who stayed on well past his shelf life.

For example, Ballmer insisted the iPhone would never gain significant market share because it was too expensive, leading to one of the worst business responses of the 21st century -- Microsoft's failure to adapt to mobile technology.That was just one of many blunders during Ballmer's career, which included showing up late to cloud computing, as well as a number of questionable acquisitions.

When Ballmer made his surprise retirement announcement last month, the response from the "fans" was loud and clear: Microsoft shares jumped 7 percent on the news.

2. Make shareholders suffer from long-term underperformance

General Electric (GE) CEO Jeffrey Immelt may have had big shoes to fill when he replace Jack Welch, who made the company the most valuable on the market. But 12 years later, he has yet to prove himself as an adequate leader.

Under his stewardship, GE has shown a lack of the innovation that was a hallmark of Welch's tenure, and Immelt's decision to grow the conglomerate's financial wing proved misguided in the wake of the financial crisis. A year or two may not be enough of a time window in which to assess management, but 12 years certainly is. With a gap like that, Immelt has failed in his task to deliver shareholder returns.

3. Consistently miss earnings estimates

Earnings estimates are largely derived from the company's own projections, so consistent misses indicate an inability to either execute plans or anticipate markets.

Westport Innovations (WPRT) has been around since 1995, led by founder and CEO David Demers, but it has yet to make a profit. Excitement has built for the natural-gas engine maker in the last few years, but financial performance has lagged.

In nine of the last 10 quarters, Westport has missed analyst estimates, often by a significant gap. In 2012, Westport delivered revenue of just $353 million, even though management guidance predicted it would pull in $400 million to $425 million as late as its second quarter of that year. The drop was due to concerns about fueling infrastructure. Demers may be difficult to replace, but results like that call for a change.

It's Time to Level the Playing Fields

CEOs of distinct and very different businesses may not be as interchangeable as football coaches. But at least in the NFL, coaches are held to high standards, and fans never hesitate to call for heads to roll after a disappointing season.

Fans are right to expect high performance. After all, these coaches are paid millions of dollars a year and are supposed to be the best-qualified candidates culled by an extremely selective process.
You could say the same for CEOs. If we demand only the best as football fans, shouldn't we do the same as investors?

Motley Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends Westport Innovations. The Motley Fool owns shares of General Electric, Microsoft and Westport Innovations.

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We should treat our politicians the same. All of Congress would have gotten axed by now, that's for sure.

September 09 2013 at 1:36 AM Report abuse rate up rate down Reply

The answer is simple: NFL coaches are more publicly exposed. While the stockholders of publicly traded companies are the only ones who really care about whether the company is successful or not, entire cities are interested in football franchises. I live in San Francisco, and I have never heard a Monday morning discussion about Oracle or Apple, but until noon, nothing is discussed except yesterday’s game.

September 09 2013 at 1:12 AM Report abuse rate up rate down Reply

Why don't we treat the president and members of congress the same way? Talk about a pack of losers. Look no further!

September 09 2013 at 1:04 AM Report abuse +1 rate up rate down Reply

CEO's have to much power to be fired by the stock holders. It's like a politician who is already in office. It is very hard to vote them out.

September 09 2013 at 12:55 AM Report abuse rate up rate down Reply
1 reply to joannecdsnj's comment

Then let's change that.

September 09 2013 at 1:36 AM Report abuse rate up rate down Reply

The problem is the unspoken myth that there are only 499 people capable of running a Fortune 500 company. This lie is used to justify all manner of incompetence and malfeasence.

September 09 2013 at 12:23 AM Report abuse rate up rate down Reply
Calvin Clary

Is this all you idiots do, sit around and think of ways you can instigate another government intrusion into the lives of Americans???? IT...IS...NONE...OF...YOUR...DAMN...BUSINESS what these companies do with their employees. This is not the community organizers country and you don't get to decide the winners and losers in industry. They have what is known as a board of directors and THEY DECIDE based on the CEO's performance. Bunch of friggin whiny babies, grow up. If the company doesn't do well, they tend to get sacked pretty easily, where the hell do you get your information??

September 08 2013 at 11:45 PM Report abuse -1 rate up rate down Reply
1 reply to Calvin Clary's comment

Only in America is highway robbery called good for business.

September 09 2013 at 12:25 AM Report abuse rate up rate down Reply

Private industrys have had to put up with government intrusions and fees and taxes that is killing the private sector. Government on the other hand never ever fire incompetent employees and for years and years the government sector has been stealing jobs from the private sectors. Why does government run buses, have their own maintenance that ought to be in the private sector? This is just one small sector of bad government and how many more jobs ought to be done in the private sector that will run efficiently, and cheaper? I live in a city that is over run by government jobs that ought to be in the private sector, but then again, isn't that what government is all about, spending taxpayers money? We get over charged and then get tax increases to pay for the inefficient employees. Start firing government is a good start.

September 08 2013 at 10:49 PM Report abuse rate up rate down Reply


September 08 2013 at 10:12 PM Report abuse rate up rate down Reply
Barack Obama


September 08 2013 at 8:47 PM Report abuse +1 rate up rate down Reply

Why don't we treat US Presidents like NFL coaches? Fire those who prove themselves to be incompetent?

September 08 2013 at 8:21 PM Report abuse +1 rate up rate down Reply
1 reply to DemocracyInPeril's comment

Why not Congressmen.

September 09 2013 at 12:41 AM Report abuse rate up rate down Reply