This paper analyzes Ulrike Malimander and Geoffrey Tate's article "CEO Overconfidence and Corporate Investment", which details the negative ramifications of CEOs in regard to corporate investment.
Abstract This paper examines an article by Ulrike Malimander and Geoffrey Tate entiotled "CEO Overconfidence and Corporate Investment." The paper describes CEOs who persistently fail to reduce their company's exposure to risk. The authors designated the term overconfident to describe this behavior of CEOs. The paper further describes the methodology used by the authors for their evaluation. The authors additionally comment on how overconfident CEOs invested more when they have more cash at hand in the company. The paper concludes with recommendations for avoiding this behavior.
Outline:
Article Overview
Methodology
Strengths of Study
Weaknesses
Additional Comments
From the Paper "Authors Ulrike Malimander and Geoffrey Tate wished to examine the negative ramifications of the actions of overconfident CEOs in regards to corporate investment. For the purposes of the study, they defined CEOS as overconfident if the individuals persistently failed to reduce their company's exposure to company-specific risk. The study postulated that managers who overestimated the returns to their investment projects over-invested when the company had abundant internal funds, but curtailed investment when the company required external financing. The CEOs acted as though they viewed external funds as unduly costly unlike internal funds. "
Abstract This document discusses several illustrative points of the article 'Seven Surprises for New CEOs' by Porter, Lorsch, and Nohria. In this article these authors discuss seven observations about the role and function of CEO in the modern organization. By doing so these authors intend to debunk the myth that the general public and even shareholders may have of what a CEO is and does. They also intend to issue a reality check for would be CEOs and employees of a given organization.
From the Paper "There are several issues that the authors of Seven Surprises for New CEOs want to communicate to the reader. Chief among them are a compendium of observations and conclusions that together act to debunk the myth that the general public has of CEOs. One other primary task these authors want to accomplish is to provide a reality check for new CEOs and for individuals entering into business who may not fully comprehend what the position of CEO entails. These two main issues can be summarized as: 1. Debunking the myth of CEO 2. Defining the role of CEO more realistically for both the organization and potential CEOs themselves General Comments Surprise One. "
Abstract This paper examines literature relevant to the traits and experiences of CEOs with a view toward identifying factors that may be useful in predicting the potential of an individual to be selected to assume the responsibilities of a CEO. More specifically, the following research question is investigated: Do CEOs have common traits or experiences that can predict their selection for the position of CEO?
The literature reviewed focuses primarily on the traits and experiences of CEOs of major corporations and on the traits and experiences used by major corporations in the selection of individuals for CEO appointments.
From the Paper "Pasternack, Van Nuys, and Perkins (1998) identified four behaviors that lead to CEO success. First, a successful CEO acts promptly once a problem has been identified and its character diagnosed. Equally important to CEO success, in this regard, is that a CEO should not act in a precipitous manner. Second, subordinate managers who do not actively support a CEO's program should be replaced quickly. Third, a CEO should prioritize her or his time and adhere to the policy thus established. Fourth, a successful CEO quickly establishes strong relationships with members of the firm's board of directors.
Paul de Benedictis (2000), Vice-President at Christian & Timbers, an executive search firm, holds that: ?Executives are hired on technical traits and are usually fired because of the wrong combination of human characteristics, or ?soft traits.? The essential elements of these "soft traits" include honesty and integrity, intellectual capacity, intensity, leadership and passion? (pp. 1-3)."
Abstract In this article, the writer notes that with the recent corporate scandals making the news, the question of corporate greed has been at the forefront of the American consciousness. The writer further points out that the possibility of corporate greed is nowhere more visibly apparent than in the cases of the CEOs of major U.S. corporations. Very often, these CEOs are paid exorbitant sums, along with fringe benefits and stock options, to manage these companies. Some estimate that U.S. CEOs are currently paid more than 300 times the wage of the average U.S. worker. The writer maintains that this higher pay scale does not necessarily mean, however, that CEOs are overpaid: In fact, the writer claims that it is evident that the growing gap between super rich CEOs and the average American worker is indicative of a rising quality of life for all of us.
From the Paper "Capitalism is, after all, an ideal mechanism for the creation of wealth through the operation of free markets and free trade. It shouldn't come as a surprise, then, that CEOs of major corporations have reaped significant benefits from the mechanisms of capitalism. What critics of CEOs pay fail to admit is that it's not just the CEOs who are better off than they were twenty years ago. American society as a whole is much better off because capitalism has fueled incredible wealth building. The rate of growth of wealth is obviously much faster for CEOs of major corporations, but that does not undermine the reality that American society as a whole is improving its fiduciary situation. The CEOs in question are simply riding the leading crest of a figurative wave.
"Consider the following facts. In 1980, there were about one dozen billionaires in the United States, 13,500 households that made more than $1 million a year, and only about 600,000 with a net worth of more than $1 million."
Abstract Examines whether or not CEOs have common traits or experiences that can predict their selection for the position of CEO. Discusses process of selection. Identifies traits & key leadership behaviors of successful CEOs; characteristics & experiences of serving CEOs in major corporations. 3 Exhibits. Annotated Bibliography.
From the Paper "Traits and Experiences of CEOs as Predictors of CEO Selection
Introduction
The importance of a firm's chief operating officer (CEO) to the firm's performance and market value has long been recognized. The dynamism of the evolving global economy has simply accentuated the significance of the CEO's role in the organization (Walman & Yammarino, 1999).
Because of the importance of the CEO to a firm's organizational performance and market value, the process of selecting individuals for appointment as CEOs has been studied extensively, and, at times, such studies have produced conflicting results (Horton, 1996). The addition of the growth of Internet-based firms has added to the complexity of determining the best fit of the traits and experiences of a..."
Abstract This paper discusses how the importance of a firm's chief operating officer (CEO) to the firm's performance and market value has long been recognized and how the process of selecting individuals for appointment as CEOs has been studied extensively and, at times, such studies have produced conflicting results. It evaluates how the addition of the growth of Internet-based firms has added to the complexity of determining the best fit of the traits and experiences of a candidate with the needs and culture of an organization. Through an extensive literature review, it analyzes traits and experiences of CEOs with a view toward identifying factors that may be useful in predicting the potential of an individual to be selected to assume the responsibilities of a CEO.
From the Paper "Pasternack, Van Nuys, and Perkins (1998) identified four behaviors that lead to CEO success. First, a successful CEO acts promptly once a problem has been identified and its character diagnosed. Equally important to CEO success, in this regard, is that a CEO should not act in a precipitous manner. Second, subordinate managers who do not actively support a CEO's program should be replaced quickly. Third, a CEO should prioritize her or his time and adhere to the policy thus established. Fourth, a successful CEO quickly establishes strong relationships "
Tags: managers, performance, performance, internet
Abstract This paper examines the book, "Five Temptations Of A CEO: A Leadership Fable", by Patrick Lencioni, about a young CEO who, while attending his first annual board review, feels that he is failing but does not know how to cope with the situation. It looks at how the author uses his talent to bring to us the complexities involved in the role of a leader and also the problems that occur with teamwork. It analyzes how the book focuses on the leadership qualities essential for any leader/CEO to acquire, as well as the five temptations that are usually responsible for the fall of any leader.
From the Paper "In this book, Andrew O?Brien is the main character, who happens to be the CEO of a technology company. He has a strange encounter with an unexpected mentor on a train the night prior to his annual meeting with the board of directors. He is in trouble but cannot understand why. This is where the mentor Charlie comes in and guides him through the five temptations that often bring trouble to ambitious executives. The five temptations are as follows, choosing status over results, choosing popularity over accountability, choosing certainty over clarity, choosing harmony over productive conflict and choosing invulnerability over trust. This book proves to be an effective fable because it does an excellent job in teaching its reader about the moral lessons behind each temptation."
Abstract This paper argues that CEO compensation does not seem to be justified by performance. It further claims that there are many moral issues, like principles of equality and democracy that are violated by exorbitant CEO compensation. It states that, ultimately, a change in CEO compensation structure may help solve some of these issues.
From the Paper "Perhaps one solution to this issue would be to tie CEO compensation to the compensation of employees in a corporation. For example, a CEOs salary would be set at a given amount (let's say 50X) the amount of that of an average worker in the corporation. The CEO could never exceed this 50X amount in base salary. Further, the amount of stock and stock options that the CEO owns could be tied to the amount that is owned by employees. If employees own .1% of stock on average, per employee, then the CEO could not own more than 50X that amount, or 5% of company stock. While this system still allows for generous CEO compensation, it manages to tie CEO compensation to that seen by average employees, and would prevent clearly exorbitant salaries like those of 531 times of the average employee."
Abstract In this article, the writer looks at the ethical elements of the discussion regarding bonuses and compensation for the CEO of an organization. The writer maintains that it is ethical for CEO's to receive large compensation packages, but only if it is inclusive of benefits for all stakeholders, not at the expense of them. The writer notes that the best way to do this is through long-term compensation packages that focus on long-term commitment and vision. The writer discusses that these packages must also focus on long-term profitability and growth for the organization, job security for employees, and return on investment for shareholders and other investors. The writer concludes that ultimately, CEO compensation should realistically follow measurable performance that benefits all stakeholders, not just a few.
From the Paper "The argument designating increasing CEO pay and decreasing shareholder value as unethical is an easy one to make. There is, however, a case to be made on the other side of the issue. Some argue that increasing CEO compensation is a simple matter of supply and demand and is driven by market forces. Others argue that the transition costs of replacing a CEO could be considerably more than the bonuses they receive. Yet another argument is that market fluctuations are inevitable and increasing bonuses are needed to retain top talent and that the investment will pay off over time. Eamonn Walsh goes as far to say that some CEO's are actually underpaid when comparing CEO compensation to stock value. It should be noted that this article focuses on the European market were CEO compensation is generally lower than in the United States. Research has shown that organizations in which their CEO's are compensated in the top 10% have an 80% percent chance of their stock outperforming their peers. Of this group the gains in market capitalization far exceeded the CEO compensation package about 80 percent of the time. On the other hand, organizations offering the lowest compensation had only a 50-50 chance of outperforming their peers."
Abstract The paper discusses the role and necessity of managers and leaders and notes the distinctions between these positions. The paper then addresses the role of the chief executive officer (CEO) and uses Michael Dell as a symbol of a successful manager who will personally invest in the wellbeing of a company. The paper contrasts this to Enron's founder and CEO, Kenneth Lay, who failed to address corporate needs, causing irreversible damage. The paper concludes that the final success of a leader depends significantly on his personal and innate capabilities.
Outline:
Managers vs. Leaders
CEOs
From the Paper "The role and necessity of both managers and leaders is undisputed for the overall success of an organization. However in small and medium size organizations, the two positions are generally occupied by the same person, the skills required and responsibilities attributed are often different. In this particular instance, the manager is expected to cope with the complexity of the business operations; he must be able to make the most informed decisions while keeping aware of the resource limitations and other constraints. The manager must also be a good organizer in order to plan the actions, the budgets and allocate the resources, including capital, labor force or technologies. Then, the manager must also be able to objectively analyze the actual implementation of the adopted course of action; he must follow how the strategies help the company achieve its ultimate goal. He must be able to identify any shortages or difficulties in the process and implement the most adequate decision. In other words, he must be able to take "effective action" (Future Vision)."
Abstract This five-page undergraduate paper reviews the accomplishments of Margaret Whitman, CEO of Ebay and takes into account her contributions to e-commerce. The CEO joined the company in 1998, her management savvy ideas along with consumer marketing techniques have turned EBAY into a $19 billion success story.
Abstract One of the most important and basic areas of organizational essentials is that of the relationship and compatibility between the conceptual perspectives and ideologies of the CEO and the collective platform of human resources; this is typically the most critical factor in regard to determining the productivity inherent to any particular firm. This paper presents a comprehensive research proposal, which ultimately concludes that motivation and hygiene are the most crucial components in regard to determining the degree of influence that the CEO yields over his or her staff members.
Paper Outline
Part I: Introduction, Purpose and Organization
Introduction
Thesis
The Purpose of the Study
The Scope of the Study
Limitations of the Study
General Background Information; Contemporaneous Organizational Socio- Psychology
The Voluntary Sector
The Motivation Factor
Part II: Theory
Analysis of the Methodological Characteristics of the Study
Part II: Data and Measurement
The Relevance of Two Opposing Psychological Tendencies
The Instrumentality of the Two Theories, X and Y
Employee Satisfaction and its Quantitative Standards
The Hierarchy of Needs & its Motivational Relevance
Part III: Data and Measurement
Part IV: Methods and Measurements
Part V: Results and Normative Paradigms
Part VI: Summary, Conclusions and Paradigm Overviews and Alternatives
References
From the Paper "John J. Morse and Jay W. Lorsch, within their study, Beyond Theory Y, 2000, take into consideration the relevance of the psychologies of employees to the intrinsic rate of organizational productivity. They assertively decree the existence of a Theory Y, that upholds and lends to the worker's naturally inherent interest in the mode of work (s) that he or she is expected to perform. The employee prefers to be self- directed and seeks responsibility. The worker is ready to solve business problems. On the other hand, there is also the acknowledgement of a Theory X, which assumes that people naturally dislike work and subsequently, that they have to be coerced, controlled and directed toward the particularly necessary organizational goals."
Abstract Financial managers and CEOs have important roles in ensuring that organizations meet their specific goals. The skill levels for both positions are high and require a great deal of patience and experience. This paper discusses whether being a financial manager is the best preparation for later becoming a CEO.
From the Paper "The article also asserts that some financial managers have different titles and different duties depending on the organization. For instance, at some institutions financial managers are known as Chief Financial Officers. (Financial Managers) Chief financial officers traditionally have more responsibility than other types of financial managers. Chief financial officers are generally responsible for all of the financial deals of an institution or organization. (Financial Managers) Chief Financial officers and CEO's often work hand in hand to manage the organization. (Financial Managers) The CFO keeps the CEO aware of all the financial dealings of the organization and ensures that the organizations finances are properly managed."
This paper reviews and analyzes the leadership styles of the various leaders and CEOs of the IBM Company from Thomas J. Watson Sr. in 1914 and up to its current CEO Samuel J. Palmisano.
Abstract This paper details and examines the leadership, history, vision, values and general business practices of the IBM Company. This paper traces the origins of the IBM Company back to 1880s and not 1911 as is commonly thought. This paper provides a comprehensive profile of IBM's present CEO Samuel J. Palmisano while focusing on his leadership style and numerous accomplishments throughout his career. This paper discusses the previous leaders at IBM's helm while also listing their contributions to the company including those of Thomas J. Watson Sr., Thomas J. Watson Jr. and Frank T. Cary amongst others. This paper explores how IBM's corporate success led to the publication of Stephen F. Covey's "The Seven Habits of Highly Successful People" and its impact on the business community. This paper also examines the IBM Company as a business leader which has always been interested and involved in the welfare of its more than 30,000 employees worldwide. This paper discusses the company's concern for the global environment as well as its world renowned reputation for high ethical standards and corporate responsibility.
Table of Contents:
Abstract
IBM - The Company
IBM's Current Leadership
Conclusion
References
From the Paper "The company has always been extremely interested in its employees, its corporate vision and values, and the global environment, and the many programs and corporate sponsorships the company has created illustrate this. The company has always been known for its high ethical standards and corporate responsibility. During World War II, when the company created many items for national defense, including bombsites, the company only took a 1 percent profit on these items, and turned the money into a fund to help widows and children of IBM workers killed in the war. They have long contributed to educational funds, and they were one of the first corporations to offer "employee group life insurance, survivor benefits, and paid vacations" ("About IBM"). IBM is an innovator in technology, but also in the internal corporate environment, and that is another reason they are a successful 21st century corporation. They have high standards for themselves and their employees, and it shows in how they do business and their corporate responsibility."
Abstract This is a review of an article by Spencer E. Ante, and Ira Sager, titled "IBM's New Boss" that appeared in the February 11, 200 issue of "Business Week." This article informs the reader about the new management styles and plans of IBM's newly chosen CEO, Samuel Palmisano. The author gives us a brief biography of Palmisano and some history of IBM before detailing some of the possible policy changes that may come about with Palmisano taking the helm of the company.
From the Paper "Palmisano is apparently something of a workaholic, scheduling weekly instead of monthly or quarterly meetings. He demands that in times of crunch, managers work from 7 am to 9 PM. He expects weekly e-mail updates, and always answers his own email. He has personally managed all but two divisions within the corporation, and made advances and innovations in each. Often small changes have had good results, such as his decision to change the commission pay scale from a "per size of deal" system to one, which was based on the eventual revenues and profits from any given sale. That one change alone catapulted revenues from 14.9 billion dollars to 22.9 billion."
