A Real Handicap?
When Mettill Lynch’s search committee interviews potential successors to ex-CEO Stan O'Neal, it probably should inquire about their golf games. Why? There's been a pretty good correlation between financial-industry CEOs' golf scores and stock-mkt performance over the past 3ys.
Co’s headed by good golfers frequently have trailed those led by duffers and non-golfers. O'Neal, for example, is a golf fanatic with a handicap of 9. He lost his job last week after presiding over Merrill’s disastrous foray into subprime mortgages and derivatives that led to an $8bn quarterly charge.
In contrast, Goldman Sachs, led by Lloyd Blankfein, a golfer with a handicap around 30, has become Wall Street's best-managed big firm. (A handicap denotes how many strokes above par a golfer usually shoots. On a typical 18-hole course, par is 72.)
Bear Stearns CEO James Cayne, meanwhile, drew criticism for taking a helicopter for a round of golf at his New Jersey club during the summer when his co was reeling from the collapse of 2 of its hedge funds.
On the other hand, CEO Dick Fuld of Lehman Brothers and American Express boss Ken Chenault both know their way around fairways and bunkers. Lehman has been a stock-mkt laggard since '05, but it has an extraordinary long-term record. Fuld and Chenault are considered to be among their industry's top CEOs.
Still, the evidence suggests that CEO's who spend too much time on the greens might not produce enough green for their shareholders.