The Advisors' Blog

– Broc Romanek

Here’s an excerpt from this Harvard Business Review blog:

Although good CEOs make a big difference, bad CEOs may matter even more. Indeed, the consequences of destructive leadership are well documented, and they are most severe at the top. Jeffrey Skilling’s greed cost Enron shareholders $63 billion. Carly Fiorina lowered HP’s stock price by 50% while firing thousands of employees, paying herself handsomely, and touring the lecturing circuit. Stan O’Neal’s reckless risk-taking sunk Merrill Lynch, yet he still managed to walk out the door with $161.5 million in severance. Although these examples may seem extreme, they are simply bigger and more famous than thousands of other less-known examples.

For instance, narcissistic CEOs pay themselves substantially more (in salaries, bonus, and stocks) even when they fail to boost business performance. Meta-analytic studies suggest that destructive CEOs, who tend to be more antisocial, volatile, and overconfident, generate higher levels of turnover, counterproductive work behaviors (bullying, theft, and cheating), and lower levels of employee engagement. It is difficult to estimate the combined economic cost of these outcomes. In the U.S. alone, the productivity losses of disengagement could amount to $550 billion, not to mention the negative effects on employee health and well-being. Clearly, CEOs are not the only determinant of disengagement, but research indicates that leadership is a significant predictor of people’s engagement (both high and low).