Freakonomics – 559. Are Two C.E.O.s Better Than One?

Intro

In this episode of Freakonomics Radio, the question of whether companies run by co-CEOs perform better than those run by solo CEOs is explored. The episode features insights from CEO experts and interviews with co-CEOs from both successful and unsuccessful companies. It draws parallels between the benefits of having two parents in raising a child and having two CEOs in running a company. The episode also discusses the rarity of co-CEOs in large publicly traded companies and the potential reasons behind it.

Main Takeaways

Benefits of Co-CEOs

• Research has found that working in pairs makes people more productive and happier.
• Co-CEOs provide coaching, collaboration, and idea bouncing.
• Co-CEOs can prevent ego-driven decisions and take less risk, but still be aligned in their decisions.
• Co-CEOs can call each other out and prevent ego-driven decisions.
• Co-CEOs can ensure the retention of two CEO candidates and key executives.
• Co-CEOs can be in two places at once, which is important for growing companies.

Challenges of Co-CEOs

• Co-CEO partnerships can unravel horribly if they become indecisive, distrusting, and spread rumors about each other.
• Examples of failed co-CEO partnerships include Chipotle and Blackberry.
• Ambiguity of control can be a challenge in the co-CEO structure.
• Communication and decision-making can become more complex with two leaders at the top.

Success and Future of Co-CEOs

• CEO pairs in data delivered annual shareholder returns nearly 40% higher than returns of firms run by solo CEOs.
• Co-CEO structure is a choice, not a prescription.
• More companies are open to the idea of co-CEOs as successors.
• Co-CEOs can provide compatibility of skill sets and better decision-making.
• Willingness to share power is crucial for co-CEOs to succeed.

Summary

Benefits of Co-CEOs

Research has shown that working in pairs makes people more productive and happier. Co-CEOs provide coaching, collaboration, and idea bouncing, which can lead to better decision-making and alignment. They can also prevent ego-driven decisions and take less risk while still being aligned in their decisions. Additionally, having two CEOs can ensure the retention of two CEO candidates and key executives, as well as allow the company to be in two places at once, which is crucial for growing companies.

Challenges of Co-CEOs

While there are potential benefits to having co-CEOs, there are also challenges that can arise. Co-CEO partnerships can unravel horribly if the individuals become indecisive, distrusting, and spread rumors about each other. Examples of failed co-CEO partnerships, such as Chipotle and Blackberry, highlight the potential risks involved. Additionally, the ambiguity of control and the complexity of communication and decision-making can be hurdles to overcome in the co-CEO structure.

Success and Future of Co-CEOs

Despite the challenges, data has shown that CEO pairs deliver higher shareholder returns compared to firms run by solo CEOs. The co-CEO structure is a choice, not a prescription, and more companies are open to the idea of co-CEOs as successors. Co-CEOs can provide compatibility of skill sets and better decision-making, as well as a balance of power within a company. However, the success of co-CEOs ultimately depends on the individuals and the specific circumstances of the company.

Conclusion

The concept of co-CEOs is a rare but growing phenomenon in corporate leadership. While there are potential benefits to having two CEOs, such as increased productivity and better decision-making, there are also challenges to overcome, including communication complexity and role confusion. The success of co-CEOs depends on the individuals involved and the specific circumstances of the company. As more companies explore the co-CEO structure, it will be interesting to see how it evolves and whether it becomes a more prevalent model in the future.