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.

  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. 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 >>
  5. Who is responsible for protecting and managing shareholders' interests?

    The average shareholder, who is typically not involved in the day-to-day operations of the company, relies on several parties ... Read Answer >>
  6. I've noticed executives buy a lot of stock below market value, and then they sell ...

    On October 30, 2006, a Google executive officer purchased 2,541 shares of Google at $9 per share and sold these same shares ... Read Answer >>
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