The Peril and Promise of Having a Star CEO

When the CEO of your company is well known, even famous, the organization may benefit in its reputation, and its ability to attract talent and investments. When that “star” dims, however, the company can suffer a great deal.

In a new essay for Harvard Business Review, Michigan Ross Professor Erik Gordon examines “The Promise and Peril of a Star CEO” ― and notes the recent examples of Tesla, Papa John’s, and CBS, all companies with high-profile leaders now dogged by scandals.

However, Gordon doesn’t necessarily recommend avoiding star CEOs; rather, he recommends specific actions corporate boards can take to reap the benefits and avoid the pitfalls.

“There are ways to thread this needle, though. Work I and others have done to help boards get the best out of CEOs who wield unusual power and bring a company unusual benefits suggest that there are ways for directors to achieve that difficult balance, even in difficult situations like the ones above,” Gordon writes.

Those ways include seeking out independent directors, supporting actions of the CEO that benefit the company, and several more.

“Even if the CEO has the power to replace you, you have legal and moral duties to try to do what is best for the company. If the balance tips and the CEO is creating more damage than benefit, you have to act,” Gordon writes.

Erik Gordon is a clinical assistant professor at the University of Michigan Ross School of Business. His interests include entrepreneurship and technology commercialization, venture capital, private equity, mergers and acquisitions, corporate governance, the biomedical industry, IoT, FinTech, and digital and mobile marketing.

Read the full HBR essay

Media contact: MichiganRossPR@umich.edu