When the firm does not do so well, and the board is thinking about replacing the CEO, the first question is: "Which CEO do we need?" The answer is often the same: someone with extensive experience and proven track record, but also a very charismatic figure. But how important it is for the director to be charismatic? There are charismatic leaders achieve better financial results, which could justify the higher personal compensation they command? Be careful what you wish for, the authors say, because you can get more than you bargained for: CEO, who exudes charm, but turns out to be a dud. The corporate world is full of overpaid, underperforming executives like Ken Lay, one of the leaders in the study, Henry L. Tosi, which examined the relationship between charisma, compensation and firm performance in a sample of 500 companies in 26 industries in 10 year period. In identifying what can sometimes be a place for a charismatic CEO when the firm operates in more turbulent environment, in general, boards and compensation committees would be well advised to see a charm offensive and stick with measuring business performance. "Hide
by Henry L. Tosi, James Van Scotter Source: IESE-Insight Magazine 7 pages. Publication Date: December 15, 2010. Prod. #: IIR038-PDF-ENG
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