{"id":17813,"date":"2023-10-04T23:56:00","date_gmt":"2023-10-04T15:56:00","guid":{"rendered":"https:\/\/www.granitefirm.com\/blog\/us\/?p=17813"},"modified":"2025-04-08T10:30:46","modified_gmt":"2025-04-08T02:30:46","slug":"underperforming-ceo","status":"publish","type":"post","link":"https:\/\/www.granitefirm.com\/blog\/us\/2023\/10\/04\/underperforming-ceo\/","title":{"rendered":"Why Can Underperforming CEOs Keep Their Jobs?"},"content":{"rendered":"\n<p>There must be many investors who are curious about why the Underperforming  CEO of many underperforming listed companies will not step down. This article is an excerpt from <a href=\"https:\/\/berkshirehathaway.com\/letters\/1988.html\" target=\"_blank\" rel=\"noreferrer noopener\">Buffett&#8217;s 1988 shareholder letter<\/a>.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/10\/04\/underperforming-ceo\/#It_is_easier_for_the_boss_to_keep_his_job\" >It is easier for the boss to keep his job<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/10\/04\/underperforming-ceo\/#General_employees_have_review_standards\" >General employees have review standards<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/10\/04\/underperforming-ceo\/#CEO_has_no_review_standards\" >CEO has no review standards<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/10\/04\/underperforming-ceo\/#CEO_has_no_immediate_supervisor\" >CEO has no immediate supervisor<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/10\/04\/underperforming-ceo\/#Board_dysfunction\" >Board dysfunction<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/10\/04\/underperforming-ceo\/#There_are_still_many_excellent_executives\" >There are still many excellent executives<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/10\/04\/underperforming-ceo\/#Related_articles\" >Related articles<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"It_is_easier_for_the_boss_to_keep_his_job\"><\/span>It is easier for the boss to keep his job<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Sometimes these CEOs clearly do not belong in their jobs; their positions, nevertheless, are usually secure. The supreme irony of business management is that it is far easier for an inadequate CEO to keep his job than it is for an inadequate subordinate.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"General_employees_have_review_standards\"><\/span>General employees have review standards<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>If a secretary, say, is hired for a job that requires typing ability of at least 80 words a minute and turns out to be capable of only 50 words a minute, she will lose her job in no time. There is a logical standard for this job; performance is easily measured; and if you can\u2019t make the grade, you\u2019re out. Similarly, if new sales people fail to generate sufficient business quickly enough, they will be let go. Excuses will not be accepted as a substitute for orders.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"CEO_has_no_review_standards\"><\/span>CEO has no review standards<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>However, a CEO who doesn\u2019t perform is frequently carried indefinitely. One reason is that performance standards for his job seldom exist. When they do, they are often fuzzy or they may be waived or explained away, even when the performance shortfalls are major and repeated. At too many companies, the boss shoots the arrow of managerial performance and then hastily paints the bullseye around the spot where it lands.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"CEO_has_no_immediate_supervisor\"><\/span>CEO has no immediate supervisor<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Another important, but seldom recognized, distinction between the boss and the foot soldier is that the CEO has no immediate superior whose performance is itself getting measured. The sales manager who retains a bunch of lemons in his sales force will soon be in hot water himself. It is in his immediate self-interest to promptly weed out his hiring mistakes. Otherwise, he himself may be weeded out. An office manager who has hired inept secretaries faces the same imperative.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Board_dysfunction\"><\/span>Board dysfunction<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>But the CEO\u2019s boss is a Board of Directors that seldom measures itself and is infrequently held to account for<br>substandard corporate performance. If the Board makes a mistake in hiring, and perpetuates that mistake, so what? Even if the company is taken over because of the mistake, the deal will probably bestow substantial benefits on the outgoing Board members. (The bigger they are, the softer they fall.)<\/p>\n\n\n\n<p>Finally, relations between the Board and the CEO are expected to be congenial. At board meetings, criticism of the CEO\u2019s performance is often viewed as the social equivalent of belching. No such inhibitions restrain the office manager from critically evaluating the substandard typist.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"There_are_still_many_excellent_executives\"><\/span>There are still many excellent executives<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>These points should not be interpreted as a blanket condemnation of CEOs or Boards of Directors: Most are able and hard-working, and a number are truly outstanding. But the management failings that Charlie and I have seen make us thankful that we are linked with the managers of our three permanent holdings. They love their businesses, they think like owners, and they exude integrity and ability.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"192\" height=\"154\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2023\/02\/Unqualified-CEO-1600x1200-1.jpg\" alt=\"underperforming CEO\" class=\"wp-image-17814\"\/><figcaption class=\"wp-element-caption\">credit: kiplinger.com<\/figcaption><\/figure>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Related_articles\"><\/span>Related articles<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/03\/14\/chinese-chip-ceo-founder\/\">The famous Chinese founder and CEO of semiconductor companies<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-admin\/post.php?post=16354&amp;action=edit\"><\/a><a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/31\/ceo-return\/\">The pros and cons of CEO returning, Boomerang CEO<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/06\/04\/shares-ceo-owns\/\">The more shares CEO owns, the higher stock return<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/06\/founder-ceo-firms\/\">Founder-CEO firms stock shown better performance<\/a>&#8220;<\/li>\n\n\n\n<li><a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/10\/04\/underperforming-ceo\/\">&#8220;Why Can Underperforming CEOs Keep Their Jobs?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/10\/18\/buffett-manage-berkshire\/\" target=\"_blank\" rel=\"noreferrer noopener\">How does Buffett manage Berkshire?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/04\/07\/how-buffett-decide-on-ceos\/\">How Buffett decide on CEOs?<\/a>&#8220;<\/li>\n<\/ul>\n\n\n\n<p><em><strong>Disclaimer<\/strong><\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><em>The content of this site is the author\u2019s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.<\/em><\/li>\n\n\n\n<li><em>I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers&#8217; direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.<\/em><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>There must be many investors who are curious about why the underperforming CEO of listed companies will not step down.<\/p>\n","protected":false},"author":1,"featured_media":17814,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[222,221],"tags":[],"class_list":["post-17813","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ceo","category-board-of-directors"],"_links":{"self":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/17813","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/comments?post=17813"}],"version-history":[{"count":18,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/17813\/revisions"}],"predecessor-version":[{"id":35742,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/17813\/revisions\/35742"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media\/17814"}],"wp:attachment":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media?parent=17813"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/categories?post=17813"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/tags?post=17813"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}