Maybe those overpaid CEOs everyone is railing against would be better off downsizing. A study profiled in Business Week shows that Chief Executive Officers with huge trophy mansions underperform in the stock market.
Two finance professors studied 432 CEOs of S&P 500 companies and found that 12 percent of them lived in homes of at least 10,000 square feet, or on a minimum of 10 acres. “And their companies’ stocks? In 2005 they lagged behind those of S&P 500 CEOs living in smaller houses by 7 percent, on average,” the article says.
In the hotel world, Paris isn’t the only Hilton who knows how to spend money better than manage it. Hilton Hotels’ Stephen Bollenbach bought a 13,000-sq.-ft. L.A. house after taking the top job in 1997. In the 36 months after the purchase, Hilton trailed the S&P by 74 percent.
Overall, the showy home buyers lagged the S&P by roughly 25 percent in the three years after their CEOs’ purchases, while smaller-home buyers’ companies beat the index by 22 percent.
Perhaps the ones who wanted to prove something should have just bought a nice little vacation home with a view instead.