In my MBA 610 class we now devote a bit more than a week to corporate governance. One of the lessons is that Super Star CEOs are rarely good for the long term prospects of the firm.
The NY Times has an interesting article that largely endorses this view: The New York Times Lo! A White Knight! So Why Isn't the Market Cheering?
Before getting to the article, let me suggest that at least some of these problems likely stem from CEO superstars trying to live up their own hype. To do so they are forced to take unwise gambles. Moreover, these CEOs often feel above the law and more important that both shareholders and their appointed Board of Directors.
Some quotes from NY Times Article:
* "Investors are often thrilled when well-known outsiders come in as white knights to run a company. But a growing body of evidence suggests that a company will perform better over the long run when it is led by a relatively anonymous insider"
* A "recent study helps to show why. The study, called "Governance and C.E.O. Turnover," was conducted by Ray Fisman and Matthew Rhodes-Kropf, associate professors of economics and finance at Columbia Business School, and Rakesh Khurana, an associate professor of organizational behavior at Harvard Business School. Their study has been circulating since last summer as an academic working paper; a version is at http://ssrn.com/abstract=656085.
Though the professors did not focus specifically on superstar or white-knight chief executives, they did study the pressures that sometimes lead companies' boards to hire them. Specifically, they were interested in the circumstances in which a board could resist shareholder demands to fire the chief because of disappointing performance."
* "From this study and other research, Professor Khurana concludes that when companies hire superstars, the result "more often than not is disappointment or even disaster." "