Insider Trading on CEOs' Dead Mother-in-Laws?

Katherine Mangu-Ward | September 5, 2007

More grist for the "why do CEOs get paid so much?" mill. In today's Wall Street Journal, Danish data on whether CEOs personal lives affect the profitability of their companies:

[Profitability] slid by about one-fifth, on average, in the two years after the death of a CEO's child, and by about 15% after the death of a spouse. As for an executive's mother-in-law, the old jokes seem to hold: The researchers found that profitability, on average, rose slightly after her demise.

One CEO wasn't very keen about the idea that investors might be interested in his personal life:

"I find it hard to imagine if I had a sick child that would be anybody's business," says Jerry W. Levin, chairman of Sharper Image Corp. and former CEO of Revlon Inc. "To assume that because something is going on in my personal life it's going to affect my business -- it's crazy. I wouldn't even ask those kinds of questions about my own employees, my own executives."

But the Journal found a silver lining for him:

On the other hand, executives might be cheered to know the studies generally conclude CEOs do matter to their companies' performance. That might bolster their side in the great debate over the magnitude of executive pay.

Read the whole paper here[PDF].

And Tyler Cowen points to another recent study of American CEOs which finds that companies whose CEOs buy huge, fancy mansions tend to underperform after the purchase.

Comments

Paul|9.5.07 @ 3:52PM|#

"I find it hard to imagine if I had a sick child that would be anybody's business," says Jerry W. Levin, chairman of Sharper Image Corp. and former CEO of Revlon Inc.

Let's hope Mr. Levin remembers that if or when he institutes drug testing or dating policies.

Regis Carnifex|9.5.07 @ 6:26PM|#

That's "Mothers-in-Law." Well, unless you mean something very different than I thought... very, very different.