Does Your CEO Value Himself Over Shareholders?

Yesterday, among the many excellent comments on How Not to Piss Off Your CEO, were a couple of readers who chose to interpret my career advice as meaning that CEOs should be put on pedestals and not held accountable.

They're obviously not long-time readers of The Corner Office.

But it got me thinking about a controversial topic that's been gnawing at my grey matter for years. There are loads of public companies that have consistently poor operating performance. In other words, they can't string together two profitable quarters to save their lives or their revenues have been declining for years. It boggles my mind.

And no, I'm not talking about cyclical and recessionary markets or startup companies that have yet to achieve their steady-state operating model. You know what I'm talking about.

Point 1. To put it succinctly, there is nothing more important to a company than profitably growing its business and therefore providing long term shareholder value in the process. And there is no excuse for failing in that goal. Here's how it should work:

• Executives: Your operating model must support that goal. You can do that by either cutting costs or growing revenues. It's really not very complicated. If, after a while, your strategy isn't working, then you try a different strategy, up to and including the possibility that this shouldn't be a standalone company. Selling the company for a fair price while it still has some value is better for shareholders than having their investment go entirely down the tubes in agonizing slow motion.
• Directors: If your CEO fails to bring his operating model in line with reality, or attempts strategic alternatives once or twice as suggested above to no avail, then you fire the CEO and get someone who is better suited to your situation and values shareholders above his or her own personal interests.
• Shareholders: If the directors fail to do that, then you vote them out and get a new slate of directors.

• Any executive who thinks there is a relatively common scenario (there are always odd exceptions to everything) whereby they should be operating consistently in the red, with consistently declining revenues, or erratically for years on end, is incompetent and should not have his job.
• On the other hand, we can all agree that most executives and directors are not stupid or incompetent. Most of them know this stuff inside and out. So why are there so many companies with consistently poor operating performance? Because some executives (and directors, as well) would rather keep their jobs than do what's right for shareholders.