Strategy Session

Most of us have heard of the Sports Illustrated curse (you know, when an athlete appears on the cover of SI, something invariably bad happens to him or her, like an injury or a slump). Now there may be an equivalent curse for CEOs.

Some researchers put this theory to the test, looking at executives who receive an award and seeing how their companies perform post-award.

Ulrike Malmendier, assistant professor of economics at the University of California, Berkeley, and Geoffrey Alan Tate, assistant professor of finance at UCLA’s Anderson School of Management, compiled a list of more than 250 CEOs who won awards from any of 10 different sources since 1975 and found that their companies underperformed afterward.

The researchers’ working paper, Superstar CEOs, concludes that award winners’ companies underperformed the broader market, both in terms of stock returns and returns on assets, over the one-, two- and three-year periods following the award, as noted in an article in the MIT Sloan Management Review.

The authors identified a peer group of CEOs who had similar characteristics and performance to the award winners, but who hadn’t won awards. What they found was quite interesting: the unheralded CEOs’ companies also underperformed — but to a much smaller degree than the award winners’ companies. The stock market returns of award-winning CEOs’ companies lagged those of their unheralded peers by about 4% per year over the three years after getting an award.

One explanation is that CEOs act differently after receiving an award. They also may be distracted by an increase in outside interests, such as writing a book and sitting on boards.

Do you think there is a Superstar Curse for CEOs?