Be glad I am not running a company
I have a big birthday coming up. In three months, I will turn fifty. Half a century old, which means I have become all but invisible to every attractive woman except my wife but am still too young to wait for death to come. Stranded in the no-mans-land of middle age. As you can see, I have been reflecting a lot about this birthday and am taking it well so far…
But this reflection on life is nothing unusual as Stephan Kramer from Erasmus University in Rotterdam documents. CEOs of companies that are at an age ending in the number ‘9’ (i.e. 39, 49, 59, etc.) do that as well. With this reflection on their past achievements and what truly matters in life, the universe, and everything (apologies to Douglas Adams) they seem to lose focus at work.
Kramer compared the performance of 1,100 companies and 1,479 CEOs. The chart below shows the Return on Assets (ROA) of the firms run by CEOs with 9-ending age compared to control firms with similar characteristics but CEOs of different ages. As you can see, the closer the CEO is to a round birthday the more his (or her) company drops in profitability.
ROA of firms with CEOs at 9-ending age
Source Kramer (2024)
Similar effects can be seen with capital expenditure, asset turnover, investment in research and development, etc. In essence, a company run by a CEO who is 39, 49, 59, etc. is underperforming on a broad range of fundamental metrics. Except one.
When it comes to earnings calls, CEOs with a 9-ending age tend to be more forthright, authentic, and less deceptive. Why? Because they are trying to find the true meaning of their lives and that spills over to communication to shareholders.
Authenticity of CEOs at 9-ending age
Source Kramer (2024)
But authenticity on an earnings call is not rewarded in markets. So, if we look at the effect on the market value of the firm, we see that firms run by CEOs aged 39, 49, 59, etc. suffer from a marked decline.
Market value of firms with CEOs at 9-ending age
Source Kramer (2024)
This brings me to my recommendation to the many company directors who I know are reading this post: When your CEOs approach a 9-ending age, fire them. You can always hire them back after their round birthday in a year but get rid of them before they ruin the company with their reflections on life. Besides, being fired on their 59th birthday will make it all the clearer to them that they truly should question past life choices…
At least this doesn't happen with the younger members of the workforce. No 19 year olds are considering the true meaning of life or reflecting on the role of their past choices on company performance. They are thinking about sex.
Source: I am a former 19 year old.
If you found a CEO of a publicly traded company with the powers to reflect on their existential state and what truly matters in life, I'd keep 'em and promote them no matter what number their age ends with. Many CEOs are obsessed with their past, present and future achievements and have heads full of fantasies and fictional narratives of what void will be filled by the wealth and power they have obtained through backstabbing and throat cutting necessary to get the top job. If there is an outlier that achieves inner clarity I'd keep them or promote them to Chairmen in a mentoring role. Chances are if they got that clarity they'd resign.