CEO is by the far the most important person in any company, business or corporations. They carry a huge role and responsibility. Also, they get paid a lot because of that. Frankly speaking, they are the one who going to shape the business towards long term success throughout the years.
There are a lot of successful CEO such as Jack Welch from General Electric and Steve Jobs from Apple Inc. They have proven to make the company up and beyond imaginations. They successful transform a multimillion dollar company to billion dollar company. More importantly, they helps investors earn a passive income by investing in their business. They are the one who we should be thanking the most if the company did really well.
On the other hand, if they did it badly, it going to hurts the company a lot. Therefore, we, as an individual investors need to understand the CEO of the company whether he is a great CEO or not. Because if he is not a great CEO, your investment in that company is going to be very risky. For example, Enron Oil company that went bankrupt in 2001 had leave behind 20,000 staff become jobless and vanishing investor money into the markets. People called it the Enron Scandal and the primary villain would be their own CEO named Kenneth Lay.
For your information, Enron Oil was an energy, commodities and securities firm headquartered in Houston. And when the company was still running during the early management, Fortune had named Enron Oil as the “America’s Most Innovative Company” for six consecutive years. But, this is before the Enron Scandal was erupted. The scandal is so big and it was called to be the largest bankruptcy reorganization in American history at that time. Moreover, Enron Oil was cited as the biggest audit failure made by Arthur Anderson Accounting Firm. Making the accounting firm strip out from the “Big Five” Accounting firm in the world.
And in October 2001, Enron reported to lost 618 millions dollar. Also, Enron had deceived investor by reporting false profits and and hiding debts more than $1 Billion according to investigators.
From the out Give and Take by Adam Grant, Kenneth Lay had been using the company money for his own personal used. And, it had been stated there was once when a secretary tried to reserve an Enron plane for an executive for business purposes, only to learns that the Lay family was using three Enron plane for personal travels.
If this situations is happening in the a company, then you should not invest in it. Moreover, Enron also lost 1.2 billion share holder equity after a huge lost while the CEO still living his life like usual.
I am not trying to say bad things about Kenneth Lay since he already dead. As a Smart Investor, I want you to learn from other people mistake and all of this information you can read it yourself in a book written Adam Grant. In addition, I want to ensure that you understand that a management problems occur inside ones company must be solve A.S.A.P or bad things will happens. When the Enron went bankrupt, so many investors lost a lot of money. Hopefully, they are all recover by now and I don’t this to happen to you. I want you to avoid this.
How to acknowledge the CEO?
Well it has become easy since we have the internet and we can use it to make some research about the CEO of a company. Especially the social media such as Facebook, Twitter and LinkedIn. And apparently, we can get a lot of information from their profile if we dig deep enough.
What should I be looking at?
According to Give and Take by Adam Grant, we can look at two ways:
1. By listening to their words.
He would tends to use first-person singular pronounce such as i, me,mine and myself most of the time. As if , he or she was the one who manage the company by themselves. Although, the staff are the one that keep the company alive. It should more of a team work to be exact.
A great CEO would notice about this teamwork and they would use first-person plural pronouns such as we and ours. They tends to remember and acknowledge their staffs contributions and treat them respectfully.This is how you can acknowledge a great CEO
2. By Looking at their photos.
Why? Because they always thinks there the center of universe like the sun. They tends to have picture of him everywhere. Big picture all around the company or inside the annual reports. Meaning that, people need to know that he or she is the great CEO although they are not . They would feel the need to be superior to others and the treated as the special person in the company.
3. They earn far more than any other executives.
Because the average numbers in of CEO salary is 2.5 times more from the next highest paid. So if the CEO is paid 4 times or more from the next highest paid. There is something which is going on.
Whether he CEO is too great or the CEO is just greedy. For example, Kenneth Lay had stated to receive paid salary about 7 times higher than the next highest paid although he rarely works for the company.
In addition, Adam Grant called these three a “lekking personality”. They tends to shows it to public without even noticing about it. But, sometimes it’s hard to notice it because they are very good at hiding it. They have expert at their finger tips to consult them.
Therefore as a Smart Investor we should be aware of the CEO of one company, business or corporations. Don’t waste your money on a bad management corporations.