11th August 2010
The behaviour of a chief executive can cost shareholders dear. The value of a talented CEO was brought into sharp relief when the departure of HP chief executive Mark Hurd wiped $10bn off the share price of the computer giant .
It comes hot on the heels of the departure of BP's Tony Hayward, whose poor handling of the Gulf of Mexico crisis undoubtedly contributed to the precipitous decline in BP's share price. His handling of the crisis managed to create some powerful enemies in the White House.
When he took a break from the clean-up operation to go sailing with his son, Rahm Emanuel, chief of staff to President Obama, described it as yet another "gaffe" by the BP chief executive.
If Hayward is the bad then Tesco boss Sir Terry Leahy has long been considered the good. When he recently announced his retirement it prompted The Mail to describe him as a ‘visionary who changed the face of shopping.'
Equally, shareholders may quibble about his £92m pay packet, but few argue that Bart Becht of Reckitt Benckiser has consistently delivered fantastic value to shareholders. The share price has outstripped near-rivals during much of his tenure.
There is plenty of competition for the ugly, though improved shareholder governance has put some checks on corporate fraud. For HP's Hurd, it was not necessarily the allegations of improper behaviour that so irritated his fellow board members, but the whiff of dodgy expense claims. Companies are sufficiently nervous about their corporate reputation – and share price – to take swift action.
To get really ugly, it is necessary to go back a few years. For example, Asil Nadir, the disgraced former head of Polly Peck, fled the country back in 1993 leaving the company to go bust. The Independent reports that he has now returned to the UK to face trial for the theft of £34m.
However, the one good legacy the likes of Nadir and Robert Maxwell of the Mirror group is better corporate governance, which means CEOs simply can't be as ugly as they used to be.