Return on Character: The Real Reason Leaders and Their Companies Win by Fred Kiel

Return on Character: The Real Reason Leaders and Their Companies Win by Fred Kiel

Author:Fred Kiel [Kiel, Fred]
Language: eng
Format: epub, mobi
ISBN: 9781625271303
Publisher: Harvard Business Review Press
Published: 2015-03-17T06:00:00+00:00


The Return on Character for Investors

Our first finding gets to the heart of ROC research, as it focuses on the question of whether organizations run by CEOs of strong character achieve better ROA than do those run by leaders of weak character. To begin that exploration, we asked CEOs in the study to provide us with financial data (total assets and net operating income) for the two fiscal years before the research surveys.

Twenty-six of the CEOs didn’t need to supply that data, because they led public companies with published financial statements. Of the privately held companies, some—but not all—gave us the financial data we asked for. In all, we acquired data for forty-four (or 52 percent of the total participant organizations). As we reviewed the profiles of those companies and their leaders, we discovered that they formed a sample that accurately represented the entire population of CEOs in the study. (Appendix B contains a full discussion of the sample size.) The members of this group were spread all along the Character Curve, and they represented the same mix of large, small, public, and private organizations and business sectors found among all study participants.

When we used this data to compute the average ROA (which represents net operating income as a percent of total assets) over the two-year period for which we obtained financial data, the results were startling. As figure 6-1 (also figure I-1) shows, the Virtuoso CEOs at the top end of the curve created a return on assets nearly five times greater than did the Self-Focused CEOs at the bottom of the curve.

Given the broad difference this data highlights, we wanted to determine whether other variables might be part of this equation. So, in addition to character, the research team compared ROA and political beliefs, size of organization, type of organization, tenure and age of the CEO, and the level of workforce engagement.



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