Home Business 9.5% of CEOs are ‘Supercommuters’ and often underperform if living near leisure spots

9.5% of CEOs are ‘Supercommuters’ and often underperform if living near leisure spots

0
9.5% of CEOs are ‘Supercommuters’ and often underperform if living near leisure spots

As a growing number of companies, including Amazon and Dell, require employees to return to the office five days a week, a contrasting trend has emerged. An increasing number of CEOs are residing hundreds of miles away from their company headquarters, typically traveling to the office for only a few days each week. This trend has been on the rise for several years but has gone largely unnoticed.

Recent detailed research indicates that this long-distance arrangement generally does not lead to optimal performance. On average, CEOs who commute from long distances tend to underperform. The research echoes suspicions that many employees may have about such fly-in executives. For instance, if these CEOs own boats, their performance tends to be worse. Similarly, residing within ten miles of a prestigious golf course seems to correlate with even lower performance levels.

A notable example of this long-distance executive lifestyle is Brian Niccol, who recently left Chipotle to become the CEO of Starbucks. Niccol commutes using a Starbucks-operated jet between Newport Beach, California, and the headquarters in Seattle, covering a distance of roughly 1,000 miles each way. His presence in Seattle is not mandated for a specific number of days each week.

The phenomenon of long-distance CEOs became more pronounced during the pandemic, although it predates COVID-19. Between 2000 and 2019, the proportion of these CEOs in public companies more than doubled from 4% to 9.5%. Researchers Ran Duchin of Boston College and Denis Sosyura of Arizona State University conducted a comprehensive study on this topic, identifying and analyzing 929 long-distance CEOs during that period.

The study reveals that these CEOs typically lead to a decline in firm performance as soon as they assume their roles. Affected companies experience drops in return on assets and overall value. This underperformance is not attributed to a lack of competence; many of these CEOs had previously managed the same companies from nearby locations with better results. The decline is specifically tied to the long-distance nature of their positions, with performance declining more steeply as the distance increases.

Boards of directors often opt to hire long-distance CEOs due to impressive qualifications, such as Ivy League educations, advanced degrees, extensive CEO experience, and well-established networks. These credentials often outweigh the costs of a long commute, despite the average negative outcomes.

The specific reasons why these super-commuters underperform remain unclear. However, their home environments, often highly attractive, may distract from business responsibilities. Companies with long-distance CEOs, particularly those owning recreational boats or living near beaches, tend to see sharper declines in operations. Those residing near top-rated golf courses face similar performance issues.

Interestingly, the states with the highest number of long-distance CEOs—such as Iowa, Kansas, North Dakota, Vermont, and Wyoming—are landlocked, rural, and cold, contrasting with the more enticing home locations of these executives.

While hiring a long-distance CEO might initially seem advantageous due to their qualifications, the partnership often ends poorly. These CEOs tend to have significantly shorter tenures, averaging 1.85 years less than typical CEOs, and are more likely to face termination. Surprisingly, their exits are often viewed positively by the market, with stock prices typically rising by 2.5% upon such announcements.

It is crucial to note that while these findings are based on aggregate data and probabilities, not all long-distance CEOs exhibit these trends. However, boards considering hiring a CEO who prefers remote living should recognize the challenges and risks involved.

Source link

Previous article Disney Cruise Line gearing up for enchanting holiday season kickoff
Next article Top 10 Laptop Stands for Any Setup (2024 Edition)
DMN8 Partners utilizes a strategy of Cross Channel marketing including local search engine optimization, PPC, messaging and hyper-targeted audiences allow our clients to experience results and ROI that fuel growth and expansion in their operations. There are a lot of digital marketing options across the country but partnering with an agency that understands multiple touches on multiple platforms allows your company’s message to be seen at the perfect time, on the perfect platform, by your perfect prospect. DMN8 Partners has had years of experience growing businesses. Start growing your business today and begin DOMINATE-ing your market.