Envy might cause a CEO to take an unprofitable leap.
That’s the finding of a study that included research by an Indiana University professor and has been accepted for publication in the Strategic Management Journal.
The study, "Ripple Effects of CEO Awards: Investigating the Acquisition Activities of Superstar CEOs’ Competitors," is authored by Wei Shi, assistant professor of management at the Indiana University Kelley School of Business, and Yan Zhang and Robert E. Hoskisson, both of Rice University’s Jesse H. Jones Graduate School of Business in Houston.
Using a sample of CEOs from the Standard & Poor’s 1500 index, the researchers found that CEOs tend to target more acquisitions in the time period after seeing their competitor win an award.
Shi, in a recent telephone interview, said the awards include recognition in various lists that major media compile, such as for best performing CEO. The lists often evaluate factors such as stock price performance.
"No wonder, right? If company is doing well, if stock price is doing well, that’s the most important factors," Shi said.
The underlying argument is CEOs who get mentioned on such lists become well recognized.
"Those who didn’t win, they feel like ‘What can I do to receive high visibility?’ " Shi said. "Well, acquisitions help them gain visibility."
But there may be a price to pay, beyond the cost of the business deal.
While acquisitions may help CEOs who have not won an award enhance their social status, the researchers found the market reacts negatively to these particular acquisitions.
Therefore, Shi said in a statement, it is not in the best interest of shareholders or the firm for a CEO to undertake more acquisitions in the time period after he or she does not win an award.
Those acquisitions could be driven by the CEO’s motivation to enhance social status rather than create value for shareholders.
The study is likely to be published within a year. Normally, it takes months "for a paper to be included in a volume," he said. "It took like almost a year to get through the review process."
Shi, who is on staff Indiana University-Purdue University Indianapolis, is a graduate of Rice University and that’s how he connected with the other professors involved in the study.
The future is now
Emerging technologies and neuroscience research are affecting the workplace and "yesterday’s biases are being replaced by modern values, culture, and relationships," according to two leadership and organizational consultants.
Those premises are part of a book they released in late February, titled "The Future-Proof Workplace: Six Strategies to Accelerate Talent Development, Reshape Your Culture, and Succeed with Purpose."
Authors Linda Sharkey and Morag Barrett rely on their work with Fortune 500 companies and CEOs worldwide to address some of the research and retooling business executives and managers might need.
The book explores six areas: leadership, culture, organizing principles, relationships, diversity and inclusion, and technology.
It says those are the "critical factors that must be addressed if you hope to remain competitive in an increasingly turbulent, global marketplace."