'Rockstar' CEO

Published by MBA Skool Team, Published on August 14, 2012

The Article written by Sindhuja Nandiraju, SJMSOM, IIT Bombay is the third prize winner of the July 2012 Article Writing Contest.

‘Rock Star’ CEO is a term used liberally in today’s business context. It usually refers to any CEO with some amount of public exposure, but this tag is truly deserved only by the ones who pass the Times Square Test. What I mean is, when someone like Steve Jobs walks around Times Square, most people would recognize him at once.  These leaders are often a brand in themselves and are inseparably associated with the companies they run.

Such a symbiosis is bound to run into a few road blocks along the way. A larger than life CEO potentially poses a problem not only to the company’s future but also to his own self. Looking at the effect on the company, the first problem that stands out is ironically also its greatest strength. The image of the CEO is intrinsically linked to the brand’s image. A recent Danish study even found a link between deaths in a CEOs family and profitability of his company. The Wall Street Journal suggests that the effect of divorces and ‘trophy wives’ on business success is an area worth researching.

Richard Branson sells the Virgin group single handedly in 30 countries around the world but this also backfires with just as much force. The 2010 movie ‘The social network’ depicted Mark Zuckerberg, founder of Facebook as tyrannical, ruthless and arrogant. In the months surrounding the release, public sentiment around Facebook dipped to 67% from 75% with Zuckerberg only managing a 60% positive appeal.

Secondly, the brand of the company depends so entirely on the CEO that when he leaves the company it never completely recovers. Sony has been struggling unsuccessfully to regain its dominance in consumer electronics after the retirement of the legendary Akio Morita. When there is such a halo atop the head honcho, the number of people willing to stand up and question his decisions decreases proportionately.

This would challenge the company in terms of innovation and novelty in product development but more seriously, it exponentially increases the possibility of abuse of power.  There couldn’t be a better example than India’s Enron. Ramalinga Raju often hailed as one of India’s most honored entrepreneurs, chairman and founder of Satyam- ironically meaning truth, admitted to fraud to the tune of 70 billion rupees. Perhaps this could have been avoided if there had been more employees at Satyam who were not caught up in the aura surrounding Ramalinga Raju.

Occasionally the company runs into trouble when the rock star lives up to his image. People join the enterprise to be close to him, gain a share of the popularity pie and follow him when he leaves. Their interests and efforts are directed at him instead of the company/brand. Ideally personal lives of CEOs- rock star or otherwise, should have nothing to do with their company’s success or failure. But it is inevitable that this aspect creeps into the balance sheet as well.

When the news of Steve jobs taking a leave for health reasons first came out, Apple shares fell nearly 10% by the end of the day. Following news of his retirement, the stock price dropped 5%. These numbers are an indication of how strongly people view the connection between Steve jobs and apple. Such large shoes must be hard to fill. Not only did the company find it extremely hard to replace a legend, but Tim Cook must also be able to handle the pressures that come with being a larger-than life CEO.

On the face of it, being a successful CEO seems like a dream job. Indeed it is, for most of the shiny faced MBA graduates who are churned out by the thousands every year. What we can’t see through our rose tinted glasses is the price they pay for these ‘perks’. Take for instance, our attitude to leaders. It is pretty similar to the way we approach religion. We turn to them in our moment of need, expect a way out of every unsolvable problem and sulk when we don’t like what they come out with. We look to them for a helping hand even into retirement.

Michael dell stepped down in 2004, presumably to enjoy his hard earned billions. 3 years later, Dell Inc’s declining fortunes forced him to come back as CEO. He’s not alone. The first person a failing company looks to is its former CEO. According to Forbes 1 out of every 4 companies looked to their illustrious leader even after he was no longer around. Like atlas, the weight of the world just keeps increasing. It can’t be easy to be expected to wave a magic wand and come up with a miraculous solution every time. Such fervent worshipping quite obviously produces an air of invulnerability.

So when they fall, they fall harder than the rest of us. I can think of no one who has been more thoroughly vilified for spending his own money than Mukesh Ambani. If nothing else, the controversy surrounding ‘Antilla’ should have made clear the social costs of being successful. Besides being responsible for his own real or imagined failures, the larger than life CEO must also be the public face of the company’s failures. Toyota CEO Akio Toyoda personally apologized to the public and to customers around the world following the massive automobile recall. His sincere apologies managed to mitigate some of the anger and sense of betrayal surrounding Toyota.  The first casualty of this enormous pressure is a CEOs family.

While Americans at least still prefer their leaders- politicians, movie stars, CEOs and the like to have the perfect family life, divorce rates among CEOs have started climbing. Even among CEOs who have had long marriages, complaints of loneliness are common. They spend long hours at the office and travel most of the time which makes them miss out on family life. Health problems, depression and isolation lead many of them to seek outside help. 40% of FTSE have used a personal coach. All in all, even when you are a rock star, it’s lonely at the top.

This article has been authored by Sindhuja Nandiraju from SJMSOM, IIT Bombay.

Image: FreeDigitalPhotos.net

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