Square’s Jack Dorsey – Tech’s Best Value Over Past 14 Months
We dipped into our CEORater database as we regularly do and ran a query to return the Technology stocks with the greatest stock price appreciation over the period January 3rd 2017 through February 23rd 2018.
We then took the Top 20 Technology Companies as measured by stock price appreciation during the period and asked the question: “Which of the 20 Technology CEOs were the best value in terms of CEO Compensation required to generate each percentage point of stock price appreciation?” For example, in the case of Mr. Dorsey at Square (tkr: SQ, Dorsey is also CEO at Twitter tkr: TWTR) who finished first on our list, for every $7 dollars of CEO Compensation the Company generated one percentage point of stock price appreciation.
Second on the list was Take-Two Interactive’s (tkr: TTWO) Strauss Zelnick at $183 of CEO Compensation for every percentage point of stock price appreciation generated. The table below details the Top 20 CEOs. Further, below the table each CEO name is linked to his/her CEORater profile page where additional detail may be found.
Bezos is Top Tech CEO with a Total Stock Return of 83,639%
We recently queried our CEORater database to identify the Top Technology CEOs as measured by stock price performance during each CEO’s tenure. Amazon’s Jeff Bezos topped our list by a wide margin. For purposes of this exercise it helped to have been a CEO for an extended period of time. It is also interesting to note that 8 of the Top 10 and 14 of the Top 20 CEOs on our list are Founder CEOs. We define “Founder” CEOs as those CEOs who were present for the first dollar of revenue earned. Additional detail may be found at CEORater.com. Contact firstname.lastname@example.org for Excel spreadsheet detail.
Our Hypothesis: Founder CEOs Will Outperform Over the Long-Term
We believe that founder CEOs will generally outperform non-founder peer group CEOs as well as broader benchmarks over the long-term. We believe this to be true both in terms of stock market returns as well as operating performance as measured by traditional financial measures such as Cash ROIC, ROE, ROA and Economic Value Added.
We recently created the CEORater Technology Founder CEO Index in part to help test our hypothesis. Over time we plan to operationalize the index to where investors may use it as an investment vehicle (stay tuned).
Founder CEOs tend to take a long-term view of the companies they created (their children). Where hired CEOs focus on the current quarter and year, many founder CEOs want their respective companies to thrive in perpetuity.
Legacy Matters to Founder CEOs
It’s about legacy for founder CEOs:
It’s why Jeff Bezos (AMZN) thinks about 50 year increments as opposed to quarterly increments;
It’s why Reed Hastings (NFLX) pushed OTT, original content and international investment when many investors wanted a U.S.-focused DVD distribution company;
It’s why Bill Stone (SSNC) has built one of largest FinTech companies during a period when much of the Capital Markets industry has become commoditized.
We reviewed Total Stock Returns over the January 3rd 2017 – February 8th 2018 period:
We wanted to see how the CEORater Technology Founder CEO Index would fare if we were to market cap weight the components (review component details here). Therefore we compared our CEORater Index to the S&P 500 Information Technology Index (Ticker: S5INFT). We compared total stock returns for each for the period January 3rd 2017 – January 22nd 2018:
The market cap weighted total stock return for the CEORater Technology Founder CEO Index over the measured period was 63.72%.
These two most recent TEK2day posts are just the beginning of our analysis in an effort to test our hypothesis that Technology companies led by founder CEOs will in the aggregate outperform peer group companies led by non-founders.
We examined the stock performance of Technology companies led by founder CEOs vs. a broader Technology index where the CEOs of the component companies are not necessarily company founders. The CEORater Technology Founder CEO Index is an extract from our CEORater database. You may view the component companies here.
We reviewed the period from January 3rd 2017 through January 22nd 2018:
The unweighted total stock return for the CEORater Technology Founder CEO Index over the measured period was 46.71%.
We Have Entered an Unprecedented Era of Shareholder Tolerance It is interesting that corporate boards and institutional investors are willing to tolerate “Distracted CEOs” and founder CEOs who wish to exercise outsized control of the companies they founded. Both are examples of poor corporate governance. Our definition of a Distracted CEO is the CEO that…