The Label Or The Characteristic: CEOs And Marriage (Stereotypes)

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The problem with looking at a demographic label rather than a person’s individual characteristics.

By Laura Yecies (CEO, SugarSync)

This headline caught my eye last week: “The Marriage Plot: Single CEOs Make for Riskier Investments”.

The CNNMoney article summarized a study conducted by two Wharton professors and released by the National Bureau of Economic Research.

The study tracked 1500 public companies and found that the stocks of companies headed by executives who are single are riskier than shares of companies run by married CEOs:

“The companies with an unmarried CEO tended to spend more money on things like R&D, acquisitions and other investments that could more rapidly increase the size of their businesses, but also had a higher chance of blowing up. The result was a more volatile stock price.”

At first I found myself smiling reading this – after all, being married for 27 years and seeing a study that has data showing that marriage is tied to positive business results was appealing. Even the thesis that tied that better performance to a steadier, more spendthrift and less impulsive hand at the tiller felt good.

But I stopped myself – doesn’t this pose a risk of leading to the same bias issue I’ve written about? Where does one go with a study like this – should a board of directors therefore give preference to married CEOs in their hiring?

The problem, of course, is it focuses on a demographic label rather than the person’s individual characteristics.

The board needs to assess the appropriate degree of growth through acquisitions, investments in R&D and other types of leadership that are needed by the company. They should combine this assessment with the other objective factors in their CEO selection and chose accordingly.

Furthermore, the best CEOs will modulate their propensity to take risk to be appropriate to the company and its situation. Those CEOs skills will be flexible for the situation. For instance, HP today requires different strategies than those required of Meg Whitman at EBay in 1999. Maggie Wilderotter (CEO of Frontier Communications) is leading a >$4B market cap communications company while she previously lead a venture back startup – Wink Communications.

Timing also affects these assessments. When I worked at Check Point, pundits would often criticize the company and its CEO Gil Shwed for not being aggressive enough either in terms of marketing and R&D spend or acquisitions – and as such comparing the company unfavorably to Cisco or Juniper. A quick check of the Nasdaq shows how temporal these views can be. Check Point was able to cleanly weather the economic downturn and is now well positioned for growth significantly outperforming those company stock’s over the last 5 years.

As I look back on my three years as CEO of SugarSync, I believe that in the first year, stabilization and conservative management were particularly important to build employee and customer confidence. In hindsight, I believe that during the following two years we probably could have handled a bit more risk and aggressiveness and I am changing some of our strategies accordingly. How correct this assessment is won’t be known for some time.

This post was originally posted at The Kitchen Sync.

Photo credit: Jeff Belmonte on Flickr.

About the guest blogger: Laura Yecies is CEO of SugarSync, makers of the award-winning SugarSync online data back-up and storage, syncing and file sharing service. She is a consumer software and Internet services industry veteran with nearly two decades of experience leading top consumer brands such as ZoneAlarm, Yahoo! and Netscape. Laura blogs at The Kitchen Sync about work, family, travel and other activities converging, and the lessons learned along the way. Follow her on Twitter at @lyecies.