• by John Gaffney , September 13, 2002

The media business certainly has its share of celebrity CEOs. Martha Stewart, Michael Eisner, Rupert Murdoch, Barry Diller and Sumner Redstone immediately come to mind. Some of those are on the hot seat right now. Some are playing a hot hand. But according to a new article in Harvard Business Review “charismatic leaders” can’t save companies. In fact, they often have a negative effect.

“Most estimates attribute anywhere from 30% to 45% of performance to industry effects abd 10% to 20% to year-to-year economic changes,” says Rakesh Khurana in “The Curse of the Superstar CEO.”

“The best anyone can say about the effect of a CEO on a company’s performance is that it depends greatly on circumstances,” he adds.

Khurana identifies three ways that celebrity CEOs destabilize companies. The first is that they threaten the success of their successors. The second: they often earn their reputation for remaking companies by “laying waste to tradition.” Third: they often expect blind obedience from their employees.

Citing the failures of Jeff Skilling at Enron, Michael Armstrong at AT&T and Jacques Nasser at Ford, Khurana believes that “white knight” leaders focus attention on themselves rather than corporate performance.

“Time and again over the past 20 years, corporate boards have seen the superstars they hoped would be saviors turn into black holes that sucked the energy and purpose out of their organizations.”

Who’s to blame? Khurana says Lee Iacocca at Chrysler was the first celebrity CEO. He also thinks Ronald Reagan’s promises of balanced budgets and lower taxes, and deliverance of record deficit was another early appearance of the charismatic leader. Finally, he says the trend should have culminated in the late 1980s as the “parade of pundits and gurus” predicted a revolution in media driven by the Internet. “It was in many respects an age of faith,” Khurana says. “A faith that was also expressed in the extravagant hopes and expectations invested in charismatic CEOs.”