The Truth Comes Out About CEOs Who Play Too Much Golf

Here's something people associate with bigwig CEOs: golf. 

But there's a problem: if your company's CEO golfs a lot, your company is probably underperforming.

A paper from Lee Biggerstaff at Miami University, David C. Cicero at the University of Alabama, and Andy Puckett at the University of Tennessee (which we were first alerted to by Bloomberg's Matt Levine) published in August looks at the relationship between CEOs that play lots of golf and the performance of those CEOs' companies. 

The findings are not in favor of the golfers. 

The authors state they were after ways that company performance related to CEOs spending time away from their companies. They settled on golf as a proxy for leisure, or a way to measure how much the CEO was "shirking" responsibilities at the company. 

The authors write that they chose golf because, "a plurality of CEOs list golf as their preferred outlet for leisure and because golf commands a significant time commitment."

To conduct this research, the authors hand-collected (!) golfing record for 363 S&P 1500 CEOs from a USGA database containing records for each round recorded in the system by golfers from 2008-2012. 

Here are some of the highlights of the paper's findings:

• Companies with CEOs in the top quartile of golf play (22 rounds or more per year) have lower operating performance and firm values.
• Some CEOs in the database played more than 100 rounds in a year! (There are 365 days in a year.)
• "While some golf rounds may serve a valid business purpose, it is unlikely that the amount of golf played by the most frequent golfers is necessary for a CEO to support her firm."
• CEOs play more golf the longer they are the CEO.
• The number of golf rounds a CEO plays are negatively correlated with changes in firm profitability. 
• Overall, higher golf play is associated with a higher probability of CEO turnover.
• One CEO played 146 rounds of golf in a year.

Among the other choice bits of info from the report include that Jimmy Cayne, the former CEO of Bear Stearns spent 10 of 21 working days away from the office playing golf or bridge in July 2007, the same month that two Bear Stearns hedge funds collapsed. (That info is gleaned from a report in The Wall Street Journal by Kate Kelly.)

As we've highlighted recently in writing about the "revolving door" issue that effects some Wall Street analysts, there are a number of things that seem weird about Wall Street or the business world, but are sort of hard to prove. 

This paper is a good example of proving something lots of people might have a hunch about.

If you went up to someone on the street and asked what a CEO has to do, it doesn't seem unlikely that you'd get a response like, "play golf with clients."

And while on some level entertaining clients, or keeping clients happy, or making appearances on behalf of your company are part of what comes with being a CEO, playing golf almost every other day is (probably) not in the job description. 

But if you play lots of golf and then get fired as a CEO for doing so, I guess you could just go play more golf. 

So, win-win?

We've embedded the whole paper below.