Do Pilots Make Better CEOs?

Do Pilots Make Better CEOs?
Do Pilots Make Better CEOs?
Wednesday, August 8, 2012 - 1:30pm

CEOs who are also pilots may be more successful leaders. That’s the conclusion of a study by Matthew Cain, assistant professor of finance at Notre Dame, and Stephen McKeon, assistant professor of finance at the University of Oregon. According to their research, the urge to fly an airplane results from an inherited tendency towards risky behavior–a tendency that appears to produce more aggressive performance and success in the corporate world. Firms led by CEO pilots typically have more debt and greater stock volatility and engage in more mergers and acquisitions. 

On the other hand, having a CEO who flies his or her own airplane is considered to be a little too risky by some corporate boards. This concern often leads to some sort of compromise, such as insisting that the chief executive always fly with a copilot or purchase “key person” insurance, which would compensate the firm for financial losses should its leader die while in office.

The still-unpublished “Cleared for Takeoff? CEO Personal Risk-Taking and Corporate Policies” is based on 18 years’ worth of information about 3,110 CEO pilots.

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““CEOs go to their vacation homes just after companies report favorable news, and CEOs return to headquarters right before subsequent news is released. More good news is released when CEOs are back at work, and CEOs appear not to leave headquarters at all if a firm has adverse news to disclose. When CEOs are away from the office, stock prices behave quietly with sharply lower volatility. Volatility increases immediately when CEOs return to work.” —David Yermack, a New York University finance professor, whose recently released study shows a correlation between when CEOs take their private jets on vacation and movements in their companies’ stock price ”

-David Yermack