By CEO capital, I mean the asset created by CEO’s reputation. It is the collective esteem that significant others, inside and outside company, hold for the company’s CEO and, for the company. It is the composite of perceptions about a CEO that a company’s stakeholders hold, whether these constituents are employees, analysts, investors, customers, media, regulators, or community leaders.
This asset can be harnessed to advance a company’s success. But, like any other wealth-creating asset, CEO capital needs to be invested in, managed, and leveraged over time to reap enduring benefits. Companies can utilize the equity that accrues from CEO capital to attract more investors, partners, customers, applicants, and trust in corporate decisions. CEO reputations, when harnessed on behalf of corporate goals, impact a company’s success and viability.
Every company must develop CEO capital, understand its underpinnings, and manage the important asset of its CEO’s reputation. When accumulated, CEO capital: Has a positive impact on a company’s reputation and success; produces clear, discernible, and valuable payoffs; is known to matter to influential constituencies; and affords more time to develop long-term solutions.
What Builds CEO Capital?
Five factors build CEO capital:
- Building credibility. This is critical to establishing a favorable CEO reputation. CEOs earn credibility by being consistently truthful and delivering on their promises and by matching behavior with their values.
- Abiding by a code of ethics. Setting and abiding by higher standards make a marked impression. CEOs must act in good faith according to ethical guidelines.
- Communicating internally. Unless CEOs communicate change and direction, most employees won’t know why and how they are being asked to lend their hands, hearts, and minds. To build CEO capital, CEOs must be tireless internal communicators.
- Attracting and retaining a quality management team. Having a highly regarded management team signals to stakeholders that the CEO has a strategy worth following. A top-notch team also signals that the CEO not only has the right people to execute his or her vision but also has prepared well for succession.
- Motivating and inspiring employees. CEOs must be pied pipers, serving as masters of ceremony at town hall meetings, leading anchors on global webcasts and teleconferences, and hosts at breakfast meetings. When CEOs inspire their employees, they build a better culture, leading to increased shareholder value. Everyone is a winner. Stakeholders look to see how CEOs manage people and put operating and social systems into place to build bench strength and keep employees loyal and productive.
These top drivers of CEO capital must all be in place for a CEO to earn top honors. When one is missing, a CEO courts disaster.
The goal is to leverage the wealth embedded in a CEO’s capital to enhance a company’s reputation and well-being, increasing its economic evaluation, and differentiating it from competitors. As a CEO builds capital, the CEO builds a company.