The Economist nails superheroes

The Economist pulls together a growing body of opinion that Superleader CEOs are rarely worth the money they are paid. It is a view that stretches back at least as far as Thomas Carlyle

The Economist article [October 1st -7th, 2011] makes enjoyable reading for its irreverant attack on the myth of the superleader.  It pulls together ideas that have been bobbing about in the waves of critical theory of leadership for some time.

Companies can point to one strong piece of evidence in favour of hiring outsiders: share prices usually leap at the news. But a gathering pile of academic studies points to the opposite conclusion…. [In an unpublished paper] Richard Cazier of Texas Christian University and John McInnis of the University of Texas at Austin bring a new level of rigour to the debate.  They discovered that the pay premium of CEOs is negatively correlated with the future performance of the firm that does the hiring. In other words: the more dazzling the outside recruit, the worse he performs in his new role.

This may be because superstars have an inflated opinion of their own abilities. They assume all the credit for the success of their previous firm, when in fact many others were involved. And they imagine that they can transform a corporate culture single-handed. Usually, they can’t. The authors observe that the tendency to hire CEOs who have done well elsewhere is most common among firms “with busy and inattentive boards”.

Feet of Clay?

The text book Dilemmas of Leadership traces the rise and fall of the heroic leader. The concept received a blow through the epithet  that ‘no man is a a hero to his valet’.  New Leadership theories have increased suspicion of the dark side of charisma, and the benefits of distributed leadership.

The new form of Superleader

Nor should we forget the concept that organisational leadership may be mythologised but in practice is often widely distributed. The superhero is now more usefully regarded as the sum of efforts of a team rather than through a charismatic individual, however well-superannuated.

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2 Responses to The Economist nails superheroes

  1. Miguel Bichara says:

    Much of any leader’s success depends on their ability to draw consistency from facts, information and people and internalize it.

    With the democratization of access to knowledge, information and people, the leadership positions tend increasingly to be brief, alternating and/or distributed.

    There is no other reason that many traditional corporate leaders try to restrict the access of their followers to knowledge, information and people, but the concern with maintaining their status as a leader (and justify their huge salaries).

  2. Thank you Miguel. We saw plenty of examples of corporate leaders who act as if they are concerned primarily out of self-interest. This is broadly in line with the theories presuming leadership is inherently power-driven. Among its advocates are critical theorists. There are advocate of ‘financialization’ such as Prof Ismael Irturk at Manchester Business School who would also agree about the levels of CEO remuneration.

    The dominant rational model explains pay differentials in the wider terms of rational self-interest with a dash of social Darwinism. The high salaries are due to ‘specialness’, and systems which seek to moderate the rewards are punished as the leaders with special gifts move on. This is the argument being used about financial leaders expected to desert London for Hong Kong etc if Government intervention weakens their bonuses.

    The point about democratization of knowledge is well-made and is often seen as contributing to ‘ambiguities’ of corporate life.

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