Gauging the quality of a CEO is an inexact science. Do you look at revenue growth? Increases in earnings? Decreases in expenses? Return to shareholders? Or do you use a combination of these plus a litany of other relevant variables that you think up?
The task is made even harder when CEOs are compared across other companies and industries. Who's to say, for example, whether Steve Jobs of Apple was a better or worse leader and visionary than Jeff Bezos of Amazon.com? Both founded and led companies that provide great products and services to their customers as well as market-smashing returns for shareholders.
Fortunately, a new service provided by Chiefist.com does the work for us. "Many of the annual exec rankings focus almost exclusively on share price improvement or some other concept of total return to shareholders," says the company's website. "While we like making a buck from our stocks as much as the next person, the notion of measuring executive performance based solely on the company's stock price pop over a 365-day period strikes us as simplistic and incomplete."
To normalize for variations across industries, in turn, the team at Chiefist developed their proprietary Business Value Enhancement Metric, or BVEM, which employs a variety of metrics to rank CEOs of publically traded companies. Among other things, it incorporates margin expansion, earnings-per-share growth, and trends in both return on equity and book value per share.
What follows is Chiefist's current list of the 10 worst small-cap CEOs since the middle of 2010, presented in descending order (like golf, a lower score is better).
|1||Dennis Pence||Coldwater Creek||284.0|
|2||James Wainscott||AK Steel Holding (NYSE: AKS )||280.6|
|3||Tony Strange||Gentiva Health Services||280.4|
|4||Rob Merwe||Checkpoint Systems (NYSE: CKP )||271.1|
|5||William Smith||Smith Micro Software||270.7|
|6||Robert Gasser||Investment Technology Group (NYSE: ITG )||266.7|
|8||Richard Whiting||Patriot Coal||263.5|
|9||Ahmad Chatila||MEMC Electronic Materials (NYSE: WFR )||263.1|
|10||Morten Arntzen||Overseas Shipholding Group (NYSE: OSG )||262.8|
Source: Chiefist.com, "Worst Small-Cap CEOs."
As you can see, this list contains CEOs from a variety of companies and industries. To mention a few:
- If you've worked in retail in the last 10 years or so, then you're likely familiar with Checkpoint Systems, the manufacturer and marketer of the upright security sensors that are omnipresent at store entrances throughout the country. Despite the ubiquity of the products, however, the company has reported a loss in four out of the last five quarters. Needless to say, given its reliance on retail, a strong economic rebound will benefit Checkpoint immensely.
- As its name suggests, AK Steel is a steel manufacturer based in Cincinnati. Earlier in the week, the company reported a net loss for the second quarter of $724.2 million, or -$6.55 per diluted share compared to earnings of $0.30 per share last year.
- Investment Technology Group is a New York-based independent research broker catering to institutional traders. As my colleague Selena Maranjian noted earlier in the year, the company has suffered recently due to weak institutional trading, leading it to announce layoffs in the middle of last year.
- MEMC Electronic Materials is a worldwide producer of wafers for the semiconductor industry. One of the issues with MEMC, as fellow Fool Rex Moore recently pointed out, is the $146 million in goodwill and other intangibles on its balance sheet, since excessive intangible assets can foreshadow bigger problems down the road. Despite this, however, MEMC has a healthy tangible book value of $502 million, allaying some of the concern.
- Finally, Overseas Shipholding Group is a shipping company specializing in transporting crude oil. As my colleague Joel South has noted, given the rising price of crude in recent years and its concomitant influence on demand, investors have recently fled shipping companies like OSG, leading to significant declines in its share price.
Despite their differences, however, the one thing these companies have in common is horrible share price performance. As you can see below, the broader market has handily outperformed all of them since this time two years ago.
Foolish bottom line
Whether you use metrics like this to gauge a CEO's value or not, it's always important to trust the people leading the companies you're invested in. And it's for this reason, that I invite you to view one of our newest free reports about three stocks that will help you retire rich. Of the stocks recommended, two of them are arguably led by the best CEOs alive today. To view this free report, click here now.