Sunday, September 09, 2007

The Private Lives of Chief Executives...

This morning I read an interesting article regarding how events in the private lives of CEOs shows up in the value of the companies they head. A few selected quotes...

"...The trend is an outgrowth of the tendency to lionize CEOs as critical to the businesses they lead. If their performance is so vital, the researchers say, investors should want to know anything that could affect it...."

"...[The three finance professors] were able to track links between CEO-family deaths and the companies' profitability over a decade.

It slid by about one-fifth, on average, in the two years after the death of a CEO's child, and by about 15 percent after the death of a spouse...."

"...A study [Yermack] co-wrote looked at executives' home purchases. It found that on average, the stocks of companies run by leaders who buy or build megamansions sharply underperform the market...." [emphases mine]

So, why did this pique my interest? Since you asked, I'll tell you.

John Edwards is running for President. Essentially, CEO of the country. A while back, I wrote of how the recurrance of Elizabeth Edwards' cancer, in an uncurable form, will affect his chances at the polls. I repeat my sincere wish for her health, but the numbers do not lie: She is dying right before our eyes. The Edwards also just moved into what can fairly be described as a "megamansion".

I have fundamental differences with John Edwards' political positions. Yet on these two counts, "investing" in a company with John Edwards as CEO does not seem to be a rational investment.

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