When a CEO of a company falls ill, it doesn’t just affect one person—it affects a whole group of stakeholders.
This played out recently when C.S. Venkatakrishnan, chief executive officer of Barclays, announced he was diagnosed with Non-Hodgkin Lymphoma, according to a disclosure by the British universal bank to the London Stock Exchange.
Over the 12 to 16 weeks of treatment he’ll need, Venkatakrishnan says he plans to still be actively engaged in managing the bank, while also periodically working from home. Even though shareholders may feel the pain of the CEO’s health concern, it may come with unexpected opportunities for employees, customers, and the bank’s community. Share prices tend to drop after the announcement of a top executive’s illness, medical leave, or hospitalization, because investors wonder how effectively a sick boss can run operations or speculate about a possible change in CEO down the line. Among U.S. firms, shares drop by almost 2% the day after an illness announcement, which amounts to $133 million for an average U.S. S&P 500 firm, according toresearchers who analyzed firms where the chief executive took a medical leave. A 10-day CEO hospitalization reduces firms’ operating profitability by about 0.5 percentage points and increases the risk of financial distress, according to an analysis of 12,753 Danish firms over 17 years,. When the CEO’s hospitalization lasts fewer than 5 days, no effect was detected. The loss of profitability appears more pronounced when the CEO is younger, newer to the job, or more educated, perhaps because such a CEO is very talented or has skills that are especially sought out, researchers in the Danish study speculate It’s not entirely clear how cancer, specifically, affects the share price. The U.S. study showed no effect when they just look at executives’ cancer announcements, but the Danish study finds cancer-related hospitalizations to matter quite a bit.
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