Spotting C.E.O. Hubris

Big businesses are (once again) learning the lesson that bigger doesn't always mean better. When aggressive mergers put a company in financial trouble, arrogance may be the motive.

What's the Latest Development?

Current Bank of America C.E.O. Brian Moynihan has been tasked with scaling back the hasty acquisitions made by former C.E.O. Ken Lewis who pushed for aggressive vertical growth. The bank is one of several major institutions relearning the lesson that bigger doesn't necessarily mean better. Corporate breakups have likewise occurred at Sara Lee, Fortune Brands and Kraft; in general, the market has responded positively to news of corporate divisions. Making companies global through large acquisitions often overly complicates their finances. 

What's the Big Idea?

Why do some companies thirst for massive acquisitions even when they may be hazardous to their long-term health? Look to the C.E.O.s who staple together these random enterprises. "'Serial acquirer' C.E.O.s see their jobs primarily as expanding corporate holdings, rather than managing their companies to produce better products and services. They often see regulators as adversaries and accounting rules as inconvenient barriers to fulfilling their plans." In a survey, C.E.O.s who saw themselves as born leaders were more likely to make large mergers and acquisitions. 

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