2 warnings signs that a CEO isn’t doing a good job

Fsp Invest, 06 Oct. 2013

Tags: ceo, warnings signs, long-term view, signs of a poor ceo,

Many CEOs aren't good at their jobs. This might sound crazy. These people appear on magazine covers and television. They earn millions of rands. They drive expensive cars and live in beautiful houses. They have to be great at running a business. Right? Wrong. Read on to uncover two things that could signal a ‘bad’ CEO is at the helm…

Great CEOs are no more common than great soccer players, Paul Mampilly in Daily Wealth explains…

Think about it: Out of the thousands of people who attempt to play professional soccer, a tiny percentage of them make it to the big league. And a tiny percentage of those people become soccer pin ups. The rest are average or below-average players.

The same thing goes for corporate South Africa… even people managing billion-rand companies.

Many CEOs will lose the shareholders' money… because they simply focus on the wrong things.

Here are two things you need to look out for in the companies of shares you own…

One thing you want to watch out for is CEOs who complain about their share price. And they will always complain that it is too low.

You want the CEO to have a long-term view for the company

If the CEO of your company is spending all his time trying to juice up the share price, that's not good for you. He's not focusing on building shareholder value for the long-term. He's worried about what the stock market says about his share price instead of the state of the business.

If the CEO focuses only on the short-term movements of his share price, perhaps he's trying to cash out of his share options… Or maybe he's trying to hit a short-term share price target that’s in his employment contract.

But while that's good for him, it's going to be bad for the company. Short-term decision-making is usually harmful to long-term returns. Ultimately, it will send the share price lower.

Another thing to look out for is the CEO who can't answer a question with plain language.

For example, when a company misses a sales target, a CEO should be able to explain this miss in a simple, understandable way to you.

If you start to hear a bunch of gobbledygook and technical jargon, you should immediately worry. Why? Because this can be a sign of a CEO that doesn’t understand their business very well.

Or just as bad, the company has bad information systems. In other words, no one really understands what is going on. You don't want to own the share of a company whose CEO is making decisions based on bad information.

So there you have it, two things that could signal a ‘bad’ CEO is at the helm.

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