My question is motivated by the recent naming of Brian Niccol as CEO at Starbucks. Niccol comes from Chipotle, where he oversaw improvement in their sales after problems with food safety. Starbucks has been suffering lagging sales and Niccol is charged with turning that around.
Of course, I don’t expect anyone here to know Niccol’s actual plans and that isn’t really the question, anyway. My question is more broad. How can Niccol (or anyone in his role) affect the product at the counter, for better or worse? What does a day at work look like for someone like him?
Mostly a CEO is responsible for the overall direction of the company. The company’s strategy and culture. Do they invest in A or B? Do they open a new factory here or there? Do they do a share buyback or re-invest that money? Should a given division be expanded or contracted?
They are also likely the one with some leverage to be able to influence law makers. I bet if Jamie Dimon (CEO of JP Morgan Chase) calls the president of the US the president will take that call. Likewise with other business leaders.
And so on.
It’s up to the people below him/her to see those directives are carried out.
Day-to-day work will be mostly reading financials and reports and having meetings and making phone calls.
I don’t have any experience with large corporations but in the smaller companies that I have worked for the CEO attends meetings, plays golf and makes deals. The CFO handles the money end and a lot of business decisions while the day to day operations is left to a company manager or operations officer. You don’t know how many business deals and customer contracts have been completed on the golf course or over a steak dinner at the country club. A good CEO deligates authority but retains final say all decisions.
Tuld: Oh, Mr. Sullivan, you’re here. Good morning. Maybe you could tell me what you think is going on here. And please, speak as you might to a young child or a golden retriever. It wasn’t brains that got me here. I can assure you of that.
Emphasis added.
And later in the scene:
Tuld: Let me tell you something, Mr. Sullivan. Do you care to know why I’m in this chair with you all? I mean, why I earn the big bucks?
Sullivan: Yes.
Tuld: I’m here for one reason and one reason alone. I’m here to guess what the music might do a week, a month, a year from now. That’s it.
Take someone like a Lou Gerstner, a famous example of a CEO who made a huge difference. When he was hired to lead IBM, after leading Amex and Nabisco, he completely changed the long term plan for the company. They had begun work to break IBM into a variety of smaller companies who each could focus on their technology and market, Gerstner personally believed that IBM had more value as a integrator.
Whether that was the right move or not is a different debate, but my point is that the CEO leads the strategy, and changes in strategy change everything.
Some Chief Executive Officers (CEO) may be engaged at the level of detail management to be “reading financials and reports” but generally speaking that falls to the other C-suite officers (Chief Financial Officer (CFO), Chief Operating Officer (COO), Chief Technology Officer (CTO), Chief Information Officer (CIO), Chief Compliance Officer (CCO)), et cetera, and their staffs who report to the CEO. The CEOs main responsibilities in most large corporations is to be the investor-facing representative of corporate management, reporting to the board of directors, making public statements about major strategy initiatives and reorganizations to increase stock valuation, and schmoozing with legislators, regulators, potential investors or buyers, et cetera.
Some CEOs are notable public-facing visionaries in the Steve Jobs mold (or, more cynically, like Elizabeth Holmes) but they are actually the exception. I doubt many non-investor ‘person on the street’ could name the CEOs of even half a dozen Fortune 100 companies unless they’ve been recently involved in some kind of major scandal. Most CEOs do not have a strong background in advanced finance beyond whatever they learned in MBA school, and while they can read a balance statement (one hopes) they are more on the “visionary” side rather than dealing with day to day management.
The previously mentioned Jamie Damon is a bit of an exception, both in his background (having started his career as a finance business consultant and worked as both a CFO and COO prior to being appointed to CEO of Bank One and then JPMorgan Chase), and having a broad understanding of international finance in depth, as well as being personable and a charismatic speaker (if often somewhat disingenuous and running a company that has displayed some highly questionable ethical practices). However, in general I would opine that most large corporate CEOs are far more narrowly focused in one particular area (often marketing, short term investment, “turnaround management”, et cetera) without great depth of knowledge in either their industry or in maintaining long term fiscal viability, which makes them appealing to investment speculators looking to turn a quick profit by pumping stock value but are not actually great at running their core business.
With regard to Brian Niccol and Chipotle, it is clear that under previous management the company has falling down the trap of explosive growth followed by market saturation (and to some extent, competition by imitators) which has placed a hard ceiling on further rates of growth and possibly overextended their fiscal base by selling franchises that have not been very profitable, and then in an effort to cut costs has lost focus on quality and food safety, which are two of the essential factors of the ‘upscale’ brand that Chipotle promoted itself as being. Niccol was hired as having purported expertise in this particular area, and also a focus on quality and consistency over just maximizing immediate profits. However, the convenience food business is somewhat different than a luxury consumable like Starbucks, and with the Chipotle brand already overextended it will require a balance of cutting back (potentially shutting down unprofitable or poorly managed franchises) while improving food quality and safety and not giving the appearance of de-growth even though that is really what is required to get back to a sound footing. It remains to be seen whether he will ultimately be successful in effecting a real turnaround or just applying quick fixes that pump up the stock price for a quick sale by canny investors and subsequent further dive in market valuation.
Jeremy Irons was great in that role, and that was a cleverly written scene to convey just how amoral the investment banking field is, but I doubt many large corporate CEOs really have that degree of self-awareness and perception of just how clueless they are. Most of them seem to be full of vastly inflated self-opinions and egotistical to an extreme, and many I suspect are complete sociopaths with no empathy or capacity for self-reflection about their faults or limitations. Ironically, Kevin Spacey’s character was supposed to be the moral conscience of that film, which makes it even more repugnant and difficult to watch. Personally, if you really want to understand how corporate finance, investment banking, and ‘leadership’ at the corporate level led to the mortgage lending crisis, I think that The Big Short is a far more instructive movie, and more accurately portrays the machinations albeit below the C-suite level.
In addition to what’s been mentioned, the CEO is the throat that gets choked when shit happens. See the CEO of Boeing (Dave Calhoun) or Kenneth Lay of Enron. Someone needs to stand in the breach when things go wrong.
Kenneth Lay was a convicted criminal…which is not an easy thing to do to a CEO.
Most CEOs have golden parachutes so, no matter how bad they are at their job, they walk away very wealthy.
According to Boeing’s most recent proxy statement, Calhoun is set to walk away with about $15 million worth of stock, cash and options in retirement. But that doesn’t account for incentives along the way that could boost his potential future earnings. One estimate, according to Fortune, suggests Calhoun could walk away with $24 million, with the potential to collect $45.5 million more if Boeing’s stock goes up 37%. That gives Calhoun a pretty hefty incentive to choose his successor carefully. - SOURCE
That’s for four years of work that he failed at and on top of what he already earned. That is the money he gets for failure and leaving.
Not to be seen as exonerating Calhoun but as CEO he inherited a company that was long in serious business decline and ethical maelstrom, and even his predecessor, Dennis Mullenberg, isn’t fully responsible for many of the decisions which led to Boeing’s multiple major program failings; that primacy falls onto James McNerney, CEO from 2005 to 2015, who made many of the highly compromised strategic, financial, and labor decisions which turned the once dominant defense and aerospace contractor of The Boeing Company into a cost-cutting lobbying interest which occasionally poops out a few marginally functional aircraft with major quality issues.
Ken Lay was an out-and-out conman who unfortunately ultimately avoided his just desserts, dying while on vacation at one of his many expensive properties while awaiting sentencing. Fuck that guy. While the CEO is kind of the ultimate fall guy for corporate malfeasance, few of them actually suffer any genuine life consequences, often leaving with massive ‘golden parachutes’ and a sheaf of stock options worth tens or hundreds of millions, provided they can claim and cash them before the company goes belly up.
Fair enough but ISTM they were brought in to right the ship. They knew the problems and challenges they had before accepting the job. They knew what their job was once they took the helm. I get it is not an easy task they had but, presumably, they thought they could do it. They didn’t.
Frankly, the corporate structure and strategy decisions made by McNerney, and perhaps even more by his predecessor, Harry Stonecipher (who inherited the CEO in the merger with McDonnell Douglas) intrinsically damaged Boeing, and the business and regulatory environment, particularly on the defense side, made it essentially impossible to reverse course. The cost cutting approach in development of the 787 and then the 737MAX development resulted in incredibly short-sighted business decisions that hypothetically could have been redirected by the CEO but there was such a ‘sunk cost’ fallacy that to do so would likely have had severe consequences in investor confidence. Boeing just really became yet another company which was viewed as “too large to fail”, when the reality that it is just too big of a bonfire to fix, basically another General Electric. I’m currently watching the same thing happen to another major aerospace contractor which is acquiring subcontractors and competitors with reckless abandon and no overarching strategy, so it isn’t as if this a unique situation.
I’ve never worked for a big corporation, but at the small places I worked at, a big part of the job of the CEO was to shield the employees from the board of directors. You’d be surprised by how many directors, or even just stockholders, think they can just call a random employee and demand something or cuss them out over something they don’t like.
It should come as no surprise that James McNerney came from General Electric where he was a top executive working under Jack Welch. (Welch was highly regarded at the time but is now blamed for practices that led to the dissolution of that once-great company.)
At my first job, which was at a Fortune 500 company that was publicly traded, but was still controlled by the founding family*, our CEO was the son of the company founder. It was once explained to me that our CEO was “Mr. Outside” – he was the face of the company to Wall Street, to the board of directors, and to the press and public. Our COO was “Mr. Inside,” and while the CEO had final sign-off on major initiatives (brand launches, capital improvements, etc.), it was the COO who generally made the high-level decisions on the company’s strategic direction.
*- the company had two classes of stock; one class was on the NYSE, while the family controlled all of the shares of the other class, which had most of the votes.
On one view, Tuld is using false modesty to disarm and put at ease the junior people in the room, particularly Sullivan. There are no actions by Tuld anywhere in the movie that are anything other than intelligent (if amoral etc).
Further, at a more pragmatic moviemaking level, Tuld’s request to have Mr Sullivan explain the position in simple terms is to enable exposition. The lay moviegoer needed to understand the situation, and if Sullivan rattled off an explanation on the assumption that everyone in the room (particularly those at the top) were very familiar with the jargon and concepts involved as they probably were, the average moviegoer would have floundered. So Tuld’s “like a child” schtick gives cover for Sullivan’s character to explain the position to the audience simply.
I worked closely with the CEO of a multinational a few years ago. Tuld very much reminds me of him. Seemingly simple, unfailingly polite but able to cut right through the bullshit and get to the heart of the matter and make decisions with a high degree of efficiency.
Another point to bear in mind is that “CEO” is not - at least where I’m from - some sort of externally controlled designation. What the self-importantly-named “CEO” of a $2 plumbing company does, and what the CEO of Boeing does, and what all the various grades in between do, has little in common.
Jack Welch was an utter shit, and along with Al Dunlap should bear primary responsibility for turning American corporate culture from one of rational—if sometimes amoral—long term profitability and growth into a numbers game focused on stock market valuation and short-term profiteering at the cost of basic viability. “The Smartest Guys In The Room” at Enron, Tyco, WorldCom, et cetera get a lot of blame for their venality but it all goes back to Welch and a few of his contemporaries who have made the corporate financial world what it is today.
Unfortunately, that “high degree of efficiency” is often lacking in self-reflection or foresight of the consequences of those decisions, both for the viability of the company and the well-being of dedicated employees. At a certain level, a CEO of a major conglomerate corporation just can’t possibly know enough about each division or subsidiary to make good strategic decisions without expert guidance, but many do anyway as they are convinced of their own brilliance even if they can’t interpret market projections, run a simple engineering calculation, or have even a basic grasp on the essential products of their business.
Indeed. “Engineered the successful turnaround and subsequent merger…” usually means “Drove the ship straight into the cliff, while sucking it dry [yes I’m mixing metaphors] and brutalizing the people who actually do the company’s business”.