Business Is Bad? Don't Fire the CEO

Baldwin Louie — Mon, 21 May 2001 18:00:00 -0400

CEOs, who often shoulder sole blame for their companies' woes, are sitting ducks in today's economy. According to a new study that measures financial performance and executive stability, however, tech companies might do better by keeping their chiefs and changing their businesses.

Of the top 25 firms in Chief Executive magazine's "CEO Growth 100," 17 firms were directly involved in information technology. The list was led by storage firm Emulex and optical component maker SDL, whose stocks have risen a whopping 4,551 percent and 3,988 percent, respectively, since 1998. After IT firms, biotech and communications companies filled out the rest of the top spots.

Chief Executive's study used data collected by Zacks Investment Research, which looked at stock prices between calendar years 1998 and 2000. The survey included only companies that retained the same CEO during those years and that have been publicly traded since 1996.

The report found that corporate remodeling was the key to surviving in a rapidly shifting business environment and that merely focusing on high-tech wasn't enough to ensure survival. "The common thread here is that companies are reinventing themselves all the time," said John Brandt, editorial director of Chief Executive. For example, modem maker Sierra Semiconductor successfully moved into broadband infrastructure when it acquired PMC in 1994 to become PMC-Sierra. Similarly, database software firm Business Objects underwent four makeovers during the past decade, morphing from integrated products to platform-independent products and finally to networked products. It also moved its headquarters from France to the U.S, where the technology revolution was in full bloom.

The report also gathered experiences from the chart toppers and came up with six recommendations on fostering change and adaptability. In order to be able to capitalize on an ever-changing business climate, the report concludes, businesses must adopt a core vision that expects business model changes, develop expertise and specialties, and adopt flexible business models. Additionally, companies need to create processes for change management, remodel to take advantage of such change, and change business models often and effectively.

RISING STARS
Technology companies lead the pack of top performing public companies with unchanged executive leadership
Company	Stock Price % Growth 1998 - '00	Description
Emulex	4,551	Storage area networking
SDL	3,988	Optical networking
Qlogic	1,988	Storage area network equipment
Network Appliance	1,346	Storage and content delivery platforms
Mercury Interactive	1,250	Web site performance management ASP
QUALCOMM	1,202	Wireless communications products
TriQuint Semiconductor	1,194	Chip maker
IDEC Pharmaceuticals	1,003	Pharmaceutical company
Business Objects	992	Database applications
EchoStar Communications	987	Satellite broadcasting
PMC - Sierra	915	Modems and broadband semiconductors
Nokia	901	Handset maker
EMC	869	Information storage products
Immunex	803	Biotechnology firm
Waters	776	Chemical laboratory equipment
ivAX	751	Pharmaceuticals holding company
Comverse Technology	736	Communications software
SEI Investments	700	Investment services firm
Oracle	682	Database software
Cree	658	Semiconductor tech company
Gemstar - TV Guide	657	Entertainment
Human Genome Sciences	597	Biotechnology firm
Dynegy	541	Energy industry ASP
America Online	515	ISP
Vitesse Semiconductor	486	Integrated circuits
Source: Chief Executive magazine/Zacks Investment Research

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Business Is Bad? Don't Fire the CEO