CEOs who don’t win awards make acquisitions


Every year, the Chief Executive Officer is tried, tested and ranked by almost every major business journalism house in the world. Some of them win awards for their achievements, turning into superstars of the business world overnight.

They are applauded by the international business community, earn significantly higher salaries and perks and become social celebrities in their own rights, being sought after by all and sundry. In fact, some of them even end up with published memoirs!

For every such award winning CEOs, however, there remain several who don’t make the cut. The objective of a research in this scenario was to look into the other side- those CEOs who did not make it to the ranks or win the awards. Are their behavior and attitude towards business affected significantly as a result?

In this case, the listings were created based on the CEOS who were selected for the top awards in numerous categories including prestigious publication houses like Businessweek, Financial World, Forbes and Harvard Business Review.

More than 200 such “star” CEOs were identified, of the top 1500 firms in the US between 1996 and 2010. The qualifying parameters of the CEOs who made it to this list was that they must have won an award between this time period and also must have been included in the rankings of top CEOs.

Their competitors among S&P 1500 numbered at 1,450 and the parameters for considerations of the competitor CEOs was that they would have operated in similar market among similar product lines. After the math was done, for every star CEO, there were 24 competing ones who didn’t make it.

The empirical theory was that non-award winning competitor CEO’s who lost out to the winners would seek other ways to gain similar social recognition and media coverage in the short term, the period immediately succeeding a CEO being awarded.

The most obvious route for this seemed to be through acquisitions – since corporate acquisitions are heavily covered by the mass media. In other words, inorganic growth through acquisitions not only provide wider media coverage, but also enhance the CEO’s profile, adding to their overall social profile, recognition and visibility.

It was seen that competitor CEOs drove their companies to make upto an astonishing 22% more acquisitions in the period immediately succeeding their peer being awarded. An interesting number was the surge in acquisition budgets in the post award period among the competitor CEOs, which was 256% more than acquisitions under normal circumstances.

The runner-ups in the rankings, in fact, were more aggressive than the competitor CEOs when it came to the rankings, increasing their acquisition strategies even more.

The overall conclusions from this remarkable study had three important inferences that could help decipher these surges in activities. Firstly, CEO motivations with regard to acquisitions are not always driven solely by business growth prospects and the onus is sometimes on the board and shareholders to accurately assess them, especially in the period immediately after such awards. Secondly, CEO awards and rankings may help sell more copies for the media houses, but they have a high potential for negative effects among the runners up and competitors who claim high social recognition and visibility. These may override any benefits they provide.

Thirdly, most CEOs studies showed signs of emotional vulnerability even as they missed out on the social recognition and media coverage of having won an award. This drove them to constantly endeavor to seek higher visibility in the business community through aggressive acquisitions, especially in the emotionally intense post-award period.