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Gods and villains
effect in response to their rst acquisition usually lost their
appetite for doing any more deals.
3 In contrast, those CEOs who – hurrah! – had experienced
a positive stock-market response to their rst takeover got
the hots for deal-making; they were very likely to undertake
even more acquisitions in the ensuing years.
4 Those subsequent deals, however – that is, takeovers by
CEOs who had done some before – on average did destroy
shareholder value! Hence, the consistent nding in academic
research that acquisitions destroy value seems to be caused
by CEOs’ later deals only.
Matthew and Yiming concluded that rst-time, successful deals
make CEOs overcondent, which not only stimulates them to
do even more deals, but also makes them inclined to pay even
heftier takeover premiums for subsequent ones, which they are
usually unable to recoup after the acquisition.
Finally, they also examined “insider trading”: whether CEOs
would purchase their own company’s stock in the period
preceding the acquisition (condent that it would increase
in value as a result of the deal). Most CEOs did, whether
they were rst-time deal-makers or experienced acquirers.
However, the effect for experienced acquirers (people who
had done deals before) was twice as big as for the novices.
Apparently, overcondent serial acquirers – who usually ended
up destroying shareholder value – most of the time fell into
their own hole; they bought the shares whose value they were
about to destroy! Guess there’s a hint of justice in this story
after all . . .
Hang the hero
There are ample examples of top managers who start to personify
their company and its success, because we see them on TV and
read about them in our newspapers and websites on a daily basis:
Steve Jobs and Apple, Carlos Ghosn and Nissan and, of course,
Jack Welch and GE.
Business Exposed74
Similarly, CEOs can become villains. They
start to personify the misery that their
organization has brought us. We mock them,
vilify them and, if we get the chance, put
them in jail. Cees van der Hoeven – who got off with a suspended
jail sentence – personied Ahold’s fall from glory; Enron’s Jeff
Skilling is spending 24 years in a prison in Minnesota (of all
places), while former media mogul Conrad Black caught some
rays of sunshine through the bars of his cell in Florida.
But do we really believe that organizations consisting of 100,000
employees, located on various continents in all corners of the
world, producing dozens of products in a multitude of industries
and markets, are controlled by the lunch-time decisions of one
man? Can one man be that omnipotent?
I guess these attributions are not restricted to business leaders.
Tolstoy had a clear opinion on the aforementioned (admittedly
rhetorical) question. In his great novel War and Peace, reecting
on the eventual defeat of Napoleon’s forces in Russia after the
battle of Borodino, he was skeptical of any attributions of omnip-
otence. He wrote:
“Many historians contend that the French failed at Borodino because
Napoleon had a cold in the head, and that if it had not been for this cold
. . . Russia would have been annihilated and the face of the world would
have been changed.”
“If it had depended on Napoleon’s will whether to ght or not to ght
the battle of Borodino, or had it depended on his will whether he gave
this order or that, it is evident that a cold affecting the functioning of his
will might have saved Russia, and consequently the valet who forgot to
bring Napoleon his waterproof boots on the 24th would be the saviour of
Russia.”
“But for minds which cannot admit that Russia was fashioned by the
will of one man . . . such reasoning will seem not merely unsound and
preposterous but contrary to the whole nature of human reality. The
question, ‘what causes historic events?’ will suggest another answer,
namely, that the course of earthly happenings . . . depends on the
combined volition of all who participate in those events, and that the
‘‘
CEOs can
become villains
’’
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