Is Stock Performance Always the Most Accurate Way to Judge a CEO’s Leadership?

Michael Teague |

Meg Whitman, CEO of Hewlett PackardIncome statements turn the focus almost entirely towards revenue and profit, and whether or not these have increased, even though on their own these metrics do not always provide the most accurate means of assessing a company’s performance.

When a stock does not perform well, often the first person or persons to be blamed are a company’s CEO and its executive management.

Each industry undergoes circumstances that will always be beyond the leadership of any single executive, or group or executives, however. Consider tech, and especially those companies involved with computer hardware, who have seen the very basis of their business undermined in a relatively short period of time with the exponentially increasing popularity of mobile devices and cloud computing.

CEOs are often brought in to companies to turn around a bad situation, a process that can often take years. This is why there was not too much nay-saying about Mike Ullman after JCPenney’s (JCP) recent worse-than-expected report. Furthermore, CEOs have as little control over what damage their predecessors may have done as they do over environmental conditions, such as extreme weather, or the oil and gas revolution in North America whose repercussions for the domestic and global energy economy are still unclear.

Bloomberg recently compiled a list of the “Biggest CEO Underachievers” that ranks today’s chief executives based on the stock performance of their respective companies.

Topping the list is Meg Whitman of Hewlett-Packard (HPQ) , who began her tenure at the PC manufacturer that was once the world’s largest back in September of 2011. Since that time, HP’s shares have dipped over 30 percent, with an annualized return rate of -3.8 percent. For the duration of her tenure, the annualized return rate of the S&P 500 has been 26.9 percent. Other tech CEOs that made the list were Virginia Rometty of IBM $(IBM), 10th on the list, who started as the head executive of the company in January of 2012, since which time shares have dropped just over 13 percent. Tim Cook of Apple (AAPL) is 12th, as his company’s stock has dropped 11.4 percent during his tenure.

Energy company CEOs figure into the list on several occasions as well. Devon Energy’s John Richels is 4th, as Devon Energy (DVN) has dropped over 22 percent since his tenure began halfway through 2010. Stephen Chazen, 7th, started with Occidental Petroleum (OXY) in May of 2011, since which time the company’s shares are down almost 18 percent.

Bank CEOs are in this top 15 list as well. James Gorman of Morgan Stanley (MS) is fifth, with the bank down 21 percent since his installment in January of 2010. Brian Moynihan of Bank of America (BAC) is in sixth, with shares down over 19 percent since his tenure began also in January of 2010. Goldman Sachs’s (GS) Lloyd Blankfein is 15th on the list, as one of the nation’s financial giants has dropped some 5 percent since he began his job in June of 2006.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
IBM International Business Machines Corp 159.85 -0.17 -0.10 1,991,120
AAPL Apple Inc. 109.20 -0.70 -0.63 23,055,983
MS Morgan Stanley 41.92 0.09 0.20 7,885,841
GS The Goldman Sachs Group Inc. 227.58 4.22 1.89 3,124,721
BAC Bank of America Corporation 21.84 0.61 2.85 91,664,458
OXY Occidental Petroleum Corporation 71.38 0.53 0.75 2,470,681
HPQ HP Inc. 15.40 0.28 1.85 6,580,471
DVN Devon Energy Corporation 48.14 0.29 0.61 2,722,449
PRGX PRGX Global Inc. 5.45 0.05 0.93 14,842
JCP J.C. Penney Company Inc. Holding Company 9.83 0.02 0.20 14,529,027

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