Even the most serious of investors can’t resist a bit of scandal, rumor, and gossip. 

The Australian Financial Review’s coverage of Mineral Resources (ASX:MIN) and WiseTech Global (ASX:WTC) — specifically, the controversies relating to the (alleged) behavior of their founder-CEOs — is perhaps proof of that. It’s almost enough to make New Idea look like the Harvard Business Review in comparison.

Still, while the coverage has been somewhat tabloid in nature, the character of corporate leaders is quite reasonably worthy of scrutiny. To paraphrase Lincoln; reputation is merely the shadow, while character is the substance that casts it.

And for those who would be the shepherds of our wealth, we should value good character.

At the same time, every saint has a past, and every sinner has a future. So we must be careful not to rely too much on the qualities of one all-too-human individual. 

So it begs the question: just how important is the founder-CEO to a company’s continued success?

The short answer is: very important, but not always in the same way, nor to the same extent.

The Early Influence of Founder-CEOs

At first, the founder is everything — the ‘prime mover’ who not only defines the company’s identity and vision, but who also drives execution.

In the 90s, when WiseTech was just getting started, Richard White wrote much of the early code for CargoWise and also handled a lot of customer sales and support. Chris Ellison famously drove and serviced trucks when Mineral Resources was in its infancy.

Their influence was direct and immediate. And very much to the advantage of shareholders (of which they were the largest).

But here’s the catch: the traits that make founder-CEOs so effective in the early stages can also become liabilities later on.

The same boldness and decisiveness that drives early success can turn into stubbornness and recklessness as the company grows. A hands-on approach, once crucial, can morph into unhelpful micromanagement. Personal passion, once inspiring, may turn into inflexibility.

When the CEO Becomes a Liability

Sometimes, a bit of success can manifest itself into something of ‘God-complex’. And that can easily be fueled if one is surrounded by an entourage of sycophants and ‘yes men.’

This can be extremely dangerous.

Julius Caesar, who witnessed this poisonous effect on past Roman Consuls, had a slave follow him during triumphal parades and whisper to him memento mori — “Remember that you are mortal.”

A funnier example can be found in the mockumentary Popstar: Never Stop Never Stopping, where Andy Samberg’s character explains his unconventional method for staying grounded:

Conner4Real: “So, to keep myself from getting a big head, I hired this guy to, uh, punch me in the nuts. Randomly. Just, you know, to remind me I’m not invincible.”

Maybe the boards of Mineral Resources or WiseTech could consider something similar?

This isn’t to suggest either founder views themselves as superior to others, but a touch more restraint might have benefited some of their decisions. Despite their humble, scrappy beginnings, the reality is that both now lead multi-billion dollar corporations upon which thousands of employees and investors rely.

And, rightly or wrongly, their behavior has had a direct and material impact on the market value of their companies.

The Investment Dilemma

The question for investors is whether these controversies have any lasting impact. 

On one hand, long-term shareholders could see this as a buying opportunity. The media will eventually lose interest, the stories will fade, and these businesses may well go on to bigger and better things in years to come.

On the other hand, if the scandals lead to the founders being sidelined, leadership may transfer to less effective hands. Worse, there could be more skeletons in the closet, with the current revelations serving as warning signs of deeper problems.

It’s hard to know, but these situations do serve as a potent reminder of the importance of good governance. 

The Transition to Maturity

As a company matures, the CEO’s role inevitably changes. The organization becomes larger, more complex, and less reliant on any one individual’s charisma or vision. It’s not about launching new products or reaching breakeven — it’s about scaling operations, optimizing processes, and managing risk.

The CEO shifts from being the company’s doer-in-chief to its chief strategist and cultural architect.

In mature companies, governance structures, performance metrics, and processes help reduce reliance on a single individual, creating resilience against the sudden loss or departure of the CEO. You’d hope to see a broad, aligned, and capable senior management team, alongside effective processes and systems.

Likewise, a capable and balanced board of directors is critical for keeping the founder in check. To give them the occasional kick in the you-know-whats. 

However, the pendulum shouldn’t swing too far; career CEOs who favor financial engineering over customer value can be just as damaging. As can stuffy, overly cautious boards that layer bureaucracy over everything and stifle agility.

Finding the Right Balance

The sweet spot is when the founder-CEO can focus on broader strategic considerations while leaving operational matters to trusted lieutenants. You want a visionary who can set the company’s direction, inspire the team, and build a healthy culture while relying on a strong management bench to handle day-to-day operations.

This requires a shift from being indispensable to becoming replaceable, not in terms of their value but in the resilience of the systems and culture they’ve built. It’s about empowering others, instituting processes that ensure continuity, and fostering a leadership pipeline that can sustain success long after the founder has stepped aside.

In the end, the best leaders are those who recognize that true legacy is defined not by their presence, but by the enduring strength of the organization they leave behind. For investors, this should be the ultimate litmus test of a company’s long-term prospects: is it built to thrive, even without its visionary at the helm?

As Peter Lynch once said, “go for a business that any idiot can run – because sooner or later, any idiot probably is going to run it.”

In the end, it’s the enduring resilience of a company that marks its legacy, not just the brilliance of its founder.

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