Who's at the Helm? Why Founders' and CEOs' Track Record and Employees' Ratings Matter.
- Max Teh
- Apr 8, 2024
- 6 min read
Updated: Apr 4
Table of Contents
Disclaimer: This communication is provided for information purposes only and is not intended as a recommendation or a solicitation to buy, sell or hold any investment product. Readers are solely responsible for their own investment decisions.
In our quest to build a winning stock portfolio, we delve into the world of company leadership. Here's why founders and CEOs with a strong track record and relevant experience deserve a spot on your investment radar.
Management is often the bottleneck of innovation, making strong leadership crucial in highly competitive industries. This is especially true for companies with fragile moats (e.g., brand-dependent businesses) or those in fast-moving markets where adaptation is key.
In contrast, some dominant firms can sustain themselves with mediocre management—what Buffett calls “businesses that can be run by idiots” but these businesses are extremely rare especially in competitive industries.
Proven Winners, Repeat Performers
Founders and CEOs with a history of success bring a winning mentality and a demonstrated ability to navigate challenges.
They've Seen the Battleground:
Relevant experience is a game-changer. Look for CEOs who have not only led companies but have done so within your target industry. Imagine Duolingo's founders, who brought their expertise from building CAPTCHA to revolutionize language learning. Their experience directly translates to understanding user needs and market trends.
Public Track Record: Numbers Speak Volumes
For companies that have already gone public, check the stock price performance during the CEO's tenure. Solid leadership often translates to shareholder value creation. Look for CEOs who have consistently grown the company's stock price.
Review the Management Snapshot from Simplywall.st
Simplywall.st provides a useful snapshot that showcase on a higher level if the company's management team pass their evaluation criteria of:
CEO Compensation analysis
Leadership Team's average tenure
Board members average tenure
These data can be a good starting point for us to get an idea if the CEO is compensating himself fairly, and also experience of the management team.
Important to Evaluate Employees Ratings for the Management Team.
When evaluating a company’s leadership, employees’ ratings provide invaluable insights. Employees interact directly with the CEO and management team, experiencing their leadership style, decision-making, and the culture they foster. Positive employee reviews often reflect a leader who inspires trust, communicates effectively, and makes decisions that prioritize both the company’s growth and its people.
High CEO approval ratings, strong senior management scores, and positive feedback on platforms like Glassdoor, Comparably, and Indeed can signal a collaborative and thriving workplace. Conversely, poor ratings may highlight potential red flags, such as misaligned priorities, ineffective communication, or a toxic work environment—all of which can impact the company’s long-term success.
By considering employees’ perceptions, you gain a ground-level perspective on the quality of leadership, which often translates into stronger organizational performance.
Here are some platforms that you should use to obtain these employees ratings for the management team.
Comparably.com
Under "Overview", look for
CEO Rating
Manager
Under the "Leadership" section, they provide pretty insightful ratings such as CEO ratings from different departments and also the average tenure of employees who tend to provide good ratings for the CEO.
Glassdoor reviews
focus on these 2 metrics
CEO Approval rate by the employees
Senior Management rating by the employees
Indeed.com
look for Management reviews score from the employees under the Reviews tab.
Where to Dig Deeper?
To further access leadership qualities, consider these resources:
Video Interviews, Conferences, and Updates: A Window into Leadership
Video interviews, conferences, and updates provide an excellent opportunity to assess the leadership team’s key qualities. Through these formats, you can evaluate their:
Communication Skills: Clarity, confidence, and the ability to articulate complex ideas in an understandable manner.
Vision and Strategy: Insights into their long-term goals and the steps they’re taking to achieve them.
Authenticity and Transparency: A leader’s demeanor in live settings can reveal their sincerity and openness about challenges and successes.
Crisis Management: Their ability to handle tough questions or unexpected situations with poise and composure.
Team Dynamics: Observing how leaders interact with colleagues and stakeholders, which can highlight collaboration and respect.
Such formats bring a personal dimension to the leadership evaluation process, allowing investors to go beyond resumes and ratings to assess whether a leadership team inspires trust and aligns with the company’s vision.
Finchat.io is a great aggregator platform to listen to the latest conference calls without needing to sign up individually for each companies.
Linkedin Profiles
LinkedIn is an invaluable tool for evaluating the background of CEOs, especially those taking over from a Founder-CEO or transitioning from other companies or internal roles. These profiles provide a detailed view of their career trajectory, key achievements, and relevant experience, helping you understand their preparedness for the role.
For instance:
Internal Climbers: When Tenure Tells a Story
Sometimes, strong leadership comes from within. If the CEO has climbed the ranks within the company, delve into their pre-succession performance, evaluate their contributions to the companies' success.
Strong operational leadership that positioned the company for future growth is often a good sign.
Case in point, Satya Nadella was promoted to CEO from within Microsoft. 
Yamini Rangan, CEO of HubSpot, brought her expertise from leadership roles in customer success and sales at leading companies before stepping up as CEO. 3. Company Proxy Statements (DEF 14A)
a. Executives & Directors' experiences & bio
These detail CEO biographies and experiences.
Method to view Proxy Statements
Look under Financials > SEC filings > Filter for "Proxy Filings" > look for "
FormDEF 14A"
Each companies' reporting format will have some nuances, but you will want to look at key words like
b. Executives & Directors' compensation structures
Under "Executive Compensation", you will find the compensation structures of the directors
As a general guideline, it will be a better if the key execs are compensated more in equity rather than cash, for more on this read this blog: Why Investors Should Favour Companies Where the CEO’s Compensation Is Mostly in Stocks Rather Than Salary
Financial News Websites & Industry Publications:
Look for articles analyzing CEO performance and company results.
AI Chatbots:
AI Chatbots which can obtain updated information like Gemini can also give a good start,
you can use a prompt such as:
"I am interested in investing in Fortinet, how are the track records and experience of their founders Ken Xie & Michael Xie?"
and you can expect a response like this which will be good for a start for your analysis.
Biographies and Autobiographies
These books offer a window into their thought processes, motivations, and the challenges they've overcome. You'll gain valuable insights into the culture they foster and the values they instill in their organizations. Biographies are a great way to understand the companies' mission & culture while providing a good gauge for the leader/founders' level of passion in running their businesses.
By prioritizing companies with strong leadership at the helm, you're increasing your chances of picking winners for your long-term financial goals. Remember, strong leadership is a key ingredient in a company's recipe for success, and your portfolio will thank you for prioritizing it.
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