Companies sweeten the offer to new managers: No move to the company headquarters? No problem.
Future Starbucks CEO Brian Niccol, who lives in California, will not have to move to the coffee chain’s Seattle headquarters. Hillary Super, the future CEO of Victoria Secret, will also be allowed to work from home, spearheading an apparent trend in which a company’s top executives work from home.
For executives who want to retain some flexibility in their day-to-day lives and spend more time at home with family, that’s a tempting prospect. But for some CEOs who work from home, it could be a huge wake-up call, say some experts on the future of work: Not only will their employees resent their boss’s absence, it could also hurt the company itself.
While the debate about remote work has gained new momentum since the pandemic, there is a long tradition of absent CEOs coming under criticism for their perceived mismanagement.
Sears CEO Eddie Lampert was criticized by other former executives for choosing to reside in Florida and rarely visiting the company’s headquarters in Illinois. Former JC Penney executives reacted similarly to now-fired CEO Ron Johnson, who refused to move to the retailer’s Texas location in 2013, even though the company was having major sales problems at the time.
This criticism is backed by facts. In a 2021 study, finance professors Ran Duchin and Denis Sosyura (of Boston University and Arizona State University, respectively) examined the connection between CEOs who worked remotely and the health of their companies. They combed through filings and proxy statements and identified over 900 publicly traded companies with CEOs who worked long distances. In a sample of over 6,600 CEOs from over 3,000 companies, those with remote CEOs had lower return on assets and market-to-book ratios—a measure of a company’s value—than those with CEOs who were in-person. This suggests that companies with remote CEOs fared worse compared to companies with executives who frequently showed up in the office.
Duchin and Sosyura also analyzed employee comments about CEOs who worked long distances on Glassdoor and found that employees perceived CEOs with remote working relationships as distant from employees and company operations.
“(There was) this notion that the CEO was really enjoying his life … probably at the expense of employees and shareholders,” Duchin said Assets“And it’s disheartening to see the CEO using the corporate jet to travel between his beach house in Florida and the company headquarters.”
This study has its limitations, however: It collected data from before the pandemic, when remote work tools became widely necessary. However, Duchin expects the trends identified in the study to continue today. Nor do the conclusions mean that companies with remote employees suffered the same consequences as those with remote CEOs. Moreover, employees who resent their CEOs’ remote work behavior may themselves suffer from a type of proximity bias. Because they are so far removed from company management, they may lack knowledge of what executives are doing, says Frank Weishaupt, CEO of video conferencing platform Owl Labs.
“Employees who don’t work closely with CEOs may not realize how much (the executives) are working from other locations because they don’t see it,” he said Assets.
A CEO’s job, by its very nature, is to oversee a company’s entire operations, and so frequent travel and working from home are often more appropriate, notes Debbie Lovich, managing director and senior partner at Boston Consulting Group.
“CEOs need to be at work,” Lovich said. “But that means a CEO should be in a manufacturing plant, a CEO should be in the stores, a CEO should be on the tarmac. A CEO should be with his people, where the work is happening.”
The big exceptions
While CEOs like Niccol and Super are in the spotlight for their relocation plans, for the vast majority of companies, their remote work status may not matter. For globally distributed companies with locations all over the world, it’s simply not practical for a CEO to show up at headquarters every day – and it doesn’t impact performance.
Duchin’s 2021 study found that for companies with large global presences, whether a CEO worked remotely had no impact on company performance. The same lack of effect was found for CEOs who worked at a company location that was not the company’s headquarters.
Someone like Niccol, who runs a company with about 400,000 employees in 87 countries, spends most of his time meeting with investors and visiting stores, not clocking in at Starbucks headquarters in Seattle, says Nick Bloom, a professor of economics and industrial organization at Stanford University.
“The fact is that he has access to a private jet that the normal employee does not have,” Bloom said Assets“He also has a much more global workplace than the typical average employee.”
A Starbucks spokesman said Assets that Niccol – whose offer letter does not require him to move from his home in Newport Beach, California – will likely still buy a house in Seattle and spend most of his time either traveling or at the company’s support center. Niccol has always wanted to stay close to his office: When he began his tenure as Chipotle’s CEO in 2018, the company even moved its headquarters near his California home.
“Brian’s schedule will exceed the hybrid work guidelines and workplace expectations we have for all partners,” the spokesperson said.
Similarly, Victoria’s Secret’s incoming CEO, Super, will be based in New York rather than the company’s original headquarters in Columbus, Ohio. A Victoria’s Secret spokesperson said many of the company’s executives are based in New York, which the company considers another headquarters, and most commute frequently between the two offices. (Victoria’s Secret is incorporated in Delaware and tells investors its legal headquarters is in Reynoldsburg, Ohio, according to Securities and Exchange Commission filings.)
A CEO like Niccol doesn’t need to change his location if he’s already traveling with the jet set, says Bloom, and there are practical reasons for that too. Hybrid working models are cheap and efficient for managers.
“It was also cheaper for Starbucks than saying, ‘We’ll add 8% to his salary just so he can stay in California, because that’s where he’s going to be anyway.'”
What is a trend?
While Niccol and Super may resist the expectation of showing up at the office every day, Duchin said the trend of CEOs working far from their headquarters has a long history, even before the pandemic.
The majority of CEOs have acknowledged that hybrid work models are here to stay because they offer employees flexibility while allowing for the in-person interactions needed to build workplace connections and streamline decision-making. For every CEO who wants the ability to work remotely, Duchin says there’s another who wants to work in the office. Just look at Zoom employees, including management, who have a flexible RTO plan.
“You often have great ideas, but when we’re all on Zoom, it’s really difficult,” CEO Eric Yuan said at a company meeting last year. “We can’t have good conversations. We can’t have good discussions with each other because everyone tends to be very friendly when you’re on a Zoom call.”
But trying to find a perfect formula for how often a CEO should come into the office is pointless, said Lovich of the Boston Consulting Group. AssetsIt’s a microcosm of the ongoing debate about returning to the office, which continues to cause frustration among bosses and employees alike.
Rather than trying to determine whether a CEO’s remote work capabilities meet a particular norm or general expectation, each executive’s work schedule should be determined by the specific company and employee needs – the same way any RTO plan should be created, she argued.
“This whole debate is the wrong one,” said Lovich. “The debate is: How do we create working models where people can work together and do their best?”
