A study conducted by the Center for Leadership Development and Research at Stanford Graduate School of Business, Stanford University’s Rock Center for Corporate Governance, and The Miles Group reveals that boardrooms are giving poor grades to CEOs for their mentoring skills and board engagement – but still prioritize financial performance above all else. More than 160 CEOs and directors of North American public and private companies were polled in the 2013 Survey on CEO Performance Evaluations, which studied how CEOs themselves and directors rate both chief executive performance as well as the performance evaluation process. When directors were asked to rank the top weaknesses of their CEO, “mentoring skills” and “board engagement” tied for the #1 spot. “This signals that directors are clearly concerned about their CEO’s ability to mentor top talent,” says Stephen Miles, founder and chief executive of The Miles Group. “Focusing on drivers such as developing the next generation of leadership is essential to planning beyond the next quarter and avoiding the short-term thinking that inhibits growth.” However, when actually evaluating the performance of a CEO, companies place very little weight on many nonfinancial performance measures. The survey found that only a 5% weighting was given to a CEO’s performance in the areas of talent development and succession planning, and only a 2.5% weighting was given to employee satisfaction/turnover.
Copyright held by David F. Larcker, Stephen Miles, Brian Tayan, and Michelle E. Gutman. Further inquiries about reproduction and use should be directed to the Corporate Governance Research Initiative.
