Management idea | Family CEOs work fewer hours than professionals
Researchers found that founder CEOs and second- and younger-generation CEOs record 11% and 6.6% fewer hours at work than professional CEOs
Mumbai: If time is money, family chief executive officers (CEOs) make less money for their firms because they spend less time working than professional CEOs, argue researchers Oriana Bandiera of the London School of Economics, Andrea Prat of the Columbia Business School and Raffaella Sadun of the Harvard Business School in their working paper Managing the Family Firm: Evidence from CEOs at Work.
“We find a stark difference between family and professional CEOs: family CEOs record 8% fewer hours,” the researchers said. In their analysis of 356 CEOs of publicly traded Indian manufacturing companies, the average CEO was found spending nine hours per day at work.
The researchers found that founder CEOs, and second- and younger-generation CEOs record 11% and 6.6% fewer hours at work than professional ones, respectively.
The authors reconstructed how CEOs spent time by interviewing their personal assistants over a week, and built an estimate of how much time CEOs allocated to business activities.
By comparing time-use with remuneration, the authors were able to confirm earlier findings that family CEOs generally underperform compared with professional managers, in the company’s performance and managerial capabilities.
Family CEOs face less external pressure to be physically present in the office, which could give them more flexibility in optimally organizing their time. But the researchers found that the share of activities planned in advance that involve several people or several distinct functions is actually lower for family CEOs.
“On the one hand, family CEOs have more direct interest in the performance of the firm and they may also care about its success for non-monetary reasons. On the other hand, wealth effects may make the marginal utility of leisure higher for family CEOs than for professional CEOs. Also, lazy professional CEOs are more likely to lose their job,” point out the authors.
The researchers believe that family CEOs adopt poor management practices and a management style that is less conducive to shareholder value maximization.
Editor's Picks »
- Reverse Pitch| “Out of 5,000 ventures, only 2% get showcased to our members”
- Congress wins Chhattisgarh by a landslide, puts an end to Raman Singh era
- Opinion| A comprehensive rejection of BJP by Chhattisgarh
- Opinion: Why Urjit Patel will not be missed as RBI governor
- Even the Raman Singh factor could not prevent the BJP debacle in Chhattisgarh
- Steel stocks get winter chill as China demand issues resurface
- Why Uday Kotak’s defiance is scaring his bank’s investors
- Exit RBI governor Urjit Patel, enter wrath of the markets?
- The government has a troubling message for minority shareholders
- Opec-allies’ output cut may not amount to big shift in oil prices