A:

C-suite executives are essential for creating and enacting overall firm strategy and are therefore an important aspect of fundamental analysis. Large publicly traded companies operate in complex and highly competitive markets with little room for error. Chief officers have final approval of all major decisions affecting total firm operations, so the C-suite is instrumental in firms sustaining and growing amid stiff competition. Poor leadership can lead to erosion of equity value quickly.

A 2012 study conducted by Daniel Wolfenzon of Columbia University, Francisco Perez-Gonzalez of Stanford University and Morten Bennedsen showed that companies whose CEOs were temporarily hospitalized underperformed on profitability, revenue and investment outcomes but returned to normal when the CEOs returned. This same study indicates that the absence of other executives does not have the same impact. The market price for company shares is also directly affected by the C-suite. When Alibaba (NYSE: BABA) named a popular new CEO in May 2015, shares surged 7.5%. When Petrobras (NYSE: PBR) announced a new CEO of whom investors disapproved in February 2015, share prices dropped as much as 9%.

The C-suite is also used to assess governance. Executive compensation, distribution of rights and other general matters of oversight governing the operations of a corporation are important for ensuring executive incentives are aligned with shareholder interests. If chief officers lack accountability and proper oversight, the company can run afoul of ethical and regulatory guidelines. Notable examples of poor governance are Enron and MCI of the early 2000s. Investors lost substantially all of the value of those companies after fallout from fraudulent activities and declarations of bankruptcy.

RELATED FAQS
  1. What qualities are necessary to be an effective member of the c-suite in a publicly-traded ...

    Learn the qualities that are required to sit on the top board of a publicly-traded company. The c-suite executives share ... Read Answer >>
  2. How are C-suite officers measured on performance?

    Find out how C-suite officers are evaluated. Learn about the evaluation process, what makes traits a CEO should exhibit and ... Read Answer >>
  3. How do the C-suite members work together to make a successful company?

    Learn more about the C-suite titles and how the executive team successfully runs a large or small organization. Find out ... Read Answer >>
  4. How can investors influence the c-suite?

    Learn how investors can influence corporate management. Find out about methods that investors use to take control and some ... Read Answer >>
  5. What are the different ways a CEO could influence stock prices?

    A CEO's influence on a stock price reflects the company's growth strategy and outlook, its financing needs and decisions ... Read Answer >>
  6. What are the different groups involved in corporate governance?

    Learn about the challenges inherent to defining and executing corporate governance, and understand why different groups work ... Read Answer >>
Related Articles
  1. Small Business

    What does C-Suite Mean?

    C-Suite is a slang term used to describe the highest level senior executives of a corporation. This is the decision-making, power center of a company. These individuals are usually paid well, ...
  2. Investing

    Lowe's Promotes 2 Executives to C-Suite Jobs

    Lowe's (NYSE: LOW) has named a new chief financial officer and a new chief marketing officer. The changes in the C-suite come at a time when the company has been doing well. Through the first ...
  3. Small Business

    CEO-to-Worker Pay Ratio Just 276 to One Last Year

    The gap between typical workers' earnings and those of their C-suite colleagues has ballooned in recent decades.
  4. Investing

    BMO Financial Group CEO to Retire; Successor Named

    North-of-the-border banking conglomerate BMO Financial Group (NYSE: BMO) has announced a major transition in its C-suite. The Canada-based lender said CEO Bill Downe is retiring effective Oct. ...
  5. Small Business

    Corporate Governance

    Corporate governance refers to the formally established guidelines that determine how a company is run. The company’s board of directors approves and periodically reviews the guidelines, which ...
  6. Investing

    How To Benefit When CEOs Step Down

    We’ve picked five examples of recent (last five years) CEO retirements that caused an unusually large move - up or down - in the price of its stock. By the end you’ll have a better understanding ...
  7. Investing

    The Top 5 Petrobras Shareholders (PBR)

    Take a look at the five largest shareholders of Petrobras stock, and learn more about how the Brazilian government has ultimate control of the company.
  8. Managing Wealth

    What CEOs Actually Do

    CEOs are responsible for the overall operation of a business, and are usually elected by shareholders and the board of directors.
  9. Managing Wealth

    Knowing Your Rights As A Shareholder

    We delve into common stock owners' privileges and how to be vigilant in monitoring a company.
  10. Managing Wealth

    Executive Pay: How Much Do Shareholders Really Care?

    How much do shareholders - or the public - really care about executive pay? A new SEC proposal may be aimed at finding out.
RELATED TERMS
  1. C-Suite

    C-Suite is a widely-used slang term used to collectively refer ...
  2. Chief Executive Officer - CEO

    A CEO is the highest ranking executive in a company whose main ...
  3. Accounting-Based Incentive

    A method for compensating corporate executives based on whether ...
  4. Enron

    A U.S. energy-trading and utilities company that perpetuated ...
  5. Shareholder Value Transfer - SVT

    A metric intended to guide shareholders in how much equity compensation ...
  6. Shareholder

    Any person, company or other institution that owns at least one ...
Hot Definitions
  1. Tax Liability

    The total amount of tax that an entity is legally obligated to pay to an authority as the result of the occurrence of a taxable ...
  2. Preferred Stock

    A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Preferred shares ...
  3. Net Profit Margin

    Net Margin is the ratio of net profits to revenues for a company or business segment - typically expressed as a percentage ...
  4. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
  5. Current Ratio

    The current ratio is a liquidity ratio measuring a company's ability to pay short-term and long-term obligations, also known ...
  6. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
Trading Center