Sunday, May 11, 2008

Why Are There No CEO Assassins?

My newly found of love of Burn Notice reminds me of a question Robin Hanson posed to use a few weeks ago. Why don't firms assassinate the CEOs of their competitors? It seems pretty strange but industrial sabotages is an old practice and a highly paid CEO is the lynchpin of the company.

It's not like it would be that difficult to get away with it given the resources these firms have at their disposal. Besides, most murders don't get solved if they are done halfway smart and pulled off by someone not in the system. Mob families have contract killings all the time (using "all the time" in a loose sense). So why aren't CEOs dropping like third world dictators? Here's a few theories.

Rule of law. This is a bit of hand-waving but it's worth noting that my above examples of common assassinations (mobs and developing nations) take place in contexts where the rule of law is precarious at best.

Externalized benefits. Your gain is your third party's gain. But she's also your rival and didn't have to pay for the hit. Even if just two firms are the biggest boys on the block by far, the threat of a new competition (which would surely arise) could get you to shrug your shoulders. Why off the CEO of Pepsi when that will allow another Pepsi to rise up? Meanwhile, Pepsi's still there and now you have two rivals.

Retaliation. This is how mob bosses (and some nations) keep the peace. A CEO is less willing to off his counterpart if he believes they'll respond in kind.

Built in redundancy. In a weird way, every firm large enough to make the risk worth it is prepared for it. It's likely not explicit, but every shareholder knows their CEO could have a heart attack or die in a car accident. If the CEO is worth his salary (and the economic analysis suggests he is), then he's worth taking out an insurance policy for. This means there are other guys who know just as much about the firm and are probably almost as good as the guy in charge. True lynch pins (such as Steve Jobs and Warren Buffet) are rare. Ok sure, you could just take out the back ups, but how do you know who they are? And more than one mysterious death will raise attention--the chance of getting caught rises pretty quickly with each additional dead body.

Shhhhhhh. Of course for all we know CEOs are killed, but we just know them as heart attacks and horrible accidents. Remember the whole idea is not getting caught.

2 comments:

Anonymous said...

Doesn't this contradict the claims that CEOs are important and deserve their high salaries? If there are such redundancies in an corporation and a CEO can be easily replaced or removed with minimal fuss and disruption, why have a CEO at all? On the other hand, if they are so vital and a corporation will suffer extreme hardship if one suddenly died then it makes sense that more would be dropping like third world dictators.

Saying that it doesn't happen because of the rule of law doesn't fit in with how corporations have ignored the law when it comes to furthering their own profit. There's more likely an "honor among thieves" attitude. Putting a hit on one CEO opens yourself up to retaliation.

Of course one day some hotshot exec will think their money and power and connections will save them from being arrested for the assassination of a rival. And they will be right. With a few rare exceptions, scandals in corporations pass quickly and the public soon forgets. This encourages corporations to go further, to push their limits in the name of profit and greed.

If corporations continue to enjoy the power they have, it's only a matter of time before the phrase "hostile takeover" involves a black ops team, automatic weapons, and plausible deniability.

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