In my effort to further understand corporate raiding / activist shareholders, I came across a webcam lecture given by Carl Icann at Yale. He has built his career on the single assumption that most management teams are bad at management. A corporate CEO does not want a ‘number-two’ that is smarter than they are, as they would be at risk of being overthrown. When the CEO does eventually change, the job is generally passed to that selectively chosen, lesser ability assistant. As a company moves from CEO #1 to CEO #2 to CEO #3, the passing of the baton is going to get progressively worse as each CEO insists on someone less smarter than themself. Later in the talk during the questions, Icann advises the student as a young investor that his first move should almost always be to fire the CEO, primarily as the majority are not used to accountability.
Would Icann be excited about startup culture as they are completely the opposite? Instead of trying to protect their place by hiring someone worse than themselves, founders hire smarter people than themselves to build out their vision and rarely feel at risk doing so. They hustle their way from zero, directly accountable to customers in a close relationship at an early stage. When they raise investment at any level, they are accountable to those investors. Both scenarios insist on accountability from a young age where the previous generation of CEO’s would be ‘climbing the corporate ladder avoiding any controversy and personal accountability. Have we done a 180 degree change?
Brian Chesky described his job as CEO of Airbnb having three core responsibilities during their explosive growth.
i) The vision of the company
ii) Building the core team.
iii) Making sure there is always money in the bank.
When Steve Jobs was fired, Apple lost their vision, upsetting their core team which affected how much was left in the bank, the three core CEO duties were destabilised by this change in management. However, an analytical mind which most investors seem to be, prefer this option of replacing the CEO as soon as those three tasks seem stable. If the founder is to remain CEO, they must reinvent themself to address the challenges of a later stage business. This point is argued by A16Z in their blogpost “Why We Prefer Founding CEO’s”. My question that I would like to learn more about is, ‘what do CEO’s do?’ in three to five points at the different stages below.
– pre-investment start-up
– post-investment start-up
Thanks for reading, please contribute a response to the question.