Rock Stars
Bob Stearns, managing director of Sternhill Partners, was the author of this week's Always On Networks' "VC Pitch" discussing the myths of venture capital. He talks about the myth of the "Rock Star CEO." You can catch Always On at http://www.alwayson-networks.com.
Stearns notes, "For certain, the choice of leadership is probably the highest-leveraged decision a board can make. And all other things being equal, somebody at the helm 'who's been there/done that' is certainly highly desirable. What could possibly be wrong with a successful past CEO with relevant knowledge of the product/market space, potential customers and strategic partners, and solid ties to good VCs and the Street? On the face of it, nothing. So what's the problem with Rock Stars?
"Well, first, Rock Stars frequently behave...well, like Rock Stars. They can be overly confident, highly demanding, poor listeners, and very expensive to put on the payroll. They may also want to bring their 'entourage' along-potentially another cost burden. Also, when Rock Stars surround themselves with lots of familiar faces, it can promote a two-team culture, the inner and the outer circle-not good for morale in any organization."
What really got me thinking about this column was reading several news reports over the weekend about CEOs and other top executives that seemingly manipulate the books (check out the number of companies recently restating the financial results of the past few years) in order to enrich themselves at the expense of the average stockholder. What happens in this scam (or unfortunate mistake, depending upon whose goose is being cooked at the time) is that executives find a way to report optimistic sales and/or profits. Maybe they report products shipped to distributors as "sales" when they have not yet been "sold." Price of the stock rises; executives cash in options; there is a sudden restatement announcement; stock tanks; those not in the know are left with losses on the stock after believing management's pitch that everything is great.
Corporate governance is going to be a topic for discussion for some time to come. I think we've had too many rock stars, with an entourage that includes board members, and too few honest executives looking out for the interests of the entire company and those it affects.
Here's to new governance standards and those who make them work.
2:25:43 PM 
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