The last item in this week’s “Weekend Cocktail Chatter” is a perhaps cruel joke (or attempt at a joke) at the expense of the former CEO of barnesandnoble.com, who announced his unexpected resignation and saw his company’s stock price barely move. The obvious question such an outcome provokes (so obvious that I had to ask it) is: If the stock market doesn’t care that I’m leaving, what good was I doing in the first place?
The irony, of course, is that Bulkeley’s departure was immediately followed by the resignations of two much-higher-profile CEOs, David Glass at Wal-Mart and Bill Gates at Microsoft (which just happens to own Slate). And in both those cases, investors reacted pretty much as they had to Bulkeley’s departure. Wal-Mart’s shares are down a tiny bit, while Microsoft’s shares are actually up almost three points. Apparently CEOs are not quite as essential as one might imagine them to be.
As it happens, that’s true, in the sense that the underlying drivers of any business are more important than the particular individual at the top (although you do have to have someone at the top who can recognize and take advantage of those drivers). In the case of Bulkeley, barnesandnoble.com has been struggling for so long, without any obvious way of improving its business fundamentals, that his departure wasn’t seen as making a fundamental difference one way or the other. In the cases of Glass and, particularly, of Gates, the economics of the companies they run are so phenomenal that it’s hard to imagine the companies falling to pieces in their absence.
But the picture is more complicated than this. Take Gates, for example. In the first place, whatever the economics of Microsoft are, he played a major role in creating them (certainly a larger role than any other person, though probably not a larger role than the advent of personal computing). In his single-minded focus on software, and his insistence that Microsoft create programs that could run on multiple platforms, Gates shaped a business that was almost a textbook example of how to achieve increasing returns on capital.
At the same time, the biggest reason why the market did not react badly to the news that Gates was stepping down as CEO is that this was truly a foregone conclusion. The groundwork had been laid for Steve Ballmer’s accession to the throne, and it’s been clear for a while that Wall Street is very comfortable with Ballmer at the reins. This is, oddly, to Gates’ credit. The paradoxical answer to the question I asked in the first paragraph, in fact, is that one measure of how well a CEO has done is the indifference with which the market takes his leaving. As William Holden says at the end of Executive Suite, the 1954 film about the succession battle at an old-line manufacturing company, a company can’t depend on just one man and still thrive. Even when that one man is the company’s founder.
This is not exactly a classic succession, of course, because Gates is not leaving the company at all and because Wall Street likes the idea that he will now have more time to think deep thoughts and not have to worry about whether the latest version of Excel is shipping on time. But when you consider that in the last month Microsoft has gotten a new CFO and a new CEO without even a hint of investor discontent, it makes you realize that the strongest management teams are also the deepest. Even in the age when intellectual capital supposedly rules all, Wall Street doesn’t invest in individuals. It invests in companies.