Companies are sweetening the pot for incoming executives: No move to company headquarters? No problem.
Starbucks’ incoming CEO Brian Niccol, who lives in California, will not be required to relocate to the coffee chain’s headquarters in Seattle. Hillary Super, Victoria Secret’s incoming chief executive, will also be permitted to work remotely, pioneering an apparent trend of a company’s top brass working from afar.
It’s a mouth-watering prospect for executives wanting to retain some day-to-day flexibility and spend some extra time at home with family. But some remote CEOs could get a massive wake-up call, some future of work experts say: Not only will their employees resent their boss’s absence from the office, it could be hurting the company itself.
While the remote-work debate has taken on a new fury since the pandemic, there's a long history of absent CEOs getting flak for their perceived mis-management.
Sears CEO Eddie Lampert was criticized by other former executives for choosing to live in Florida and rarely visiting the company’s Illinois headquarters. JC Penney’s former executives had a similar reaction to now-ousted CEO Ron Johnson, who refused to relocate to the retailer’s Texas base in 2013, despite its profound sales troubles at the time.
These critiques are rooted in evidence. In a 2021 study, finance professors Ran Duchin and Denis Sosyura (of Boston University and Arizona State University, respectively) measured the relationship between CEOs who worked remotely and the health of their companies. Digging through filings and proxy statements, they identified over 900 publicly traded companies with CEOs who had long-distance working relationships. Among a sample of over 6,600 CEOs across over 3,000 companies, the companies with remote CEOs had lower return on assets and market-to-book ratios—a measure looking at a company’s worth—than companies with in-person CEOs. This suggests that companies with long-distance CEOs suffered compared to those with leaders who frequently showed up to the office.
Duchin and Sosyura also analyzed employee comments about remote CEOs on Glassdoor and found that employees found CEOs who had long-distance working relationships as being detached from employees and company operations.
“[There was] this notion of perceiving the CEO as really kind of enjoying his life…presumably, at the expense of the employees, shareholders,” Duchin told Fortune. “And it's disheartening to see the CEO using the company's jet to go back and forth between his beach house in Florida and the company's headquarters.”
There are limitations to this research: It collected data from prior to the pandemic, when remote work tools became widely necessary, though Duchin expected the trends identified in the study to continue today. The conclusions also don’t mean companies with remote employees suffered the same consequences as those with remote CEOs. Plus, employees resentful of their CEOs’ remote work behaviors may themselves be suffering from a type of proximity bias. Because they’re so many degrees of separation from company management, they may lack knowledge about what executives do, Frank Weishaupt, CEO of video conference platform Owl Labs, said.
“Employees who don’t work closely with the CEOs may not realize how much [the leaders are] working from other places because they don’t see it,” he told Fortune.
A CEO’s job by nature involves overseeing the full operations of a company, and is often better suited to frequent travel and remote work, noted Debbie Lovich, managing director and senior partner of Boston Consulting Group.
“CEOs need to be at the work,” Lovich said. “But, by the way, that means a CEO should be in a manufacturing plant, a CEO should be out in the stores, a CEO should be on the tarmac. A CEO should be with their people where the work is happening.”
The big exceptions
While CEOs like Niccol and Super are in the spotlight over their relocation plans, their remote work status may not matter for the vast majority of companies. For globally dispersed firms with locations peppered across the world, it’s just not practical for a CEO to show up to headquarters every day—and it doesn’t impact performance.
Duchin found in his 2021 study that for companies with large global presences, whether a CEO worked remotely did not impact a company’s performance outcomes. The same lack of effect was found for CEOs who worked in a company office location that was not its main headquarters.
Someone like Niccol, who runs a company of roughly 400,000 employees across 87 countries, will spend a majority of their time meeting with investors and visiting stores, not clocking in to Starbucks’ Seattle headquarters, according to Nick Bloom, an economics and industrial organization professor at Stanford University.
“The fact is, he has access to a private jet that the typical rank and file employee doesn't,” Bloom told Fortune. “He also has a much more global workplace than a typical average employee.”
A Starbucks spokesperson told Fortune that Niccol—whose offer letter does not require him to relocate from his Newport Beach, California, home—will likely still purchase a home in Seattle, as well as spend the majority of his time either traveling or working at the company’s Support Center. Niccol has a history of wanting to stay close to the office: When he began his tenure as Chipotle’s CEO in 2018, the company even moved its headquarters near his California home.
“Brian’s schedule will exceed the hybrid work guidelines and workplace expectations we have for all partners,” the spokesperson said.
It’s a similar story for incoming Victoria’s Secret CEO Super, who will be based in New York instead of the company’s original Columbus, Ohio, headquarters. A spokesperson for Victoria’s Secret said many of the company’s executives are based in New York, which the company considers another headquarters, and most make frequent trips between the two offices. (Victoria’s Secret is incorporated in Delaware and tells investors its legal headquarters are in Reynoldsburg, Ohio, according to Securities and Exchange Commission filings.)
There’s another level of practicality to not requiring a CEO like Niccol to relocate if he’s going to be jetsetting anyway, Bloom said. Hybrid work is cheap and efficient for executives.
“For Starbucks, it was also cheaper, rather than saying, ‘We’ll whack in another 8% of salary just to let him stay in California, given he's going to be there anyway.’”
What’s in a trend?
While Niccol and Super may be bucking expectations of showing up to the office daily, Duchin said the trend of CEOs being based far away from their headquarters has a long pre-pandemic history.
The majority of CEOs have conceded that hybrid work is here to stay because it provides employees flexibility, while allowing for the face-to-face interactions necessary to build workplace connections and optimize decision-making. For every CEOs who wants remote work capabilities for themselves, Duchin said, there’s another who wants to work in the office. Just look at Zoom’s employees, including management, who have a flexible RTO plan.
"Quite often, you come up with great ideas, but when we are all on Zoom, it's really hard," CEO Eric Yuan said in a company meeting last year. "We cannot have a great conversation. We cannot debate each other well because everyone tends to be very friendly when you join a Zoom call."
But trying to find a perfect formula for how often a CEO should come into the office is futile, Lovich, of the Boston Consulting Group, told Fortune. It’s a microcosm of the ongoing return-to-office debate that has continued to stoke frustration among both bosses and employees.
Instead of trying to determine whether a CEO’s remote work capabilities match a certain norm or across-the-board expectation, each executive’s work schedule should be determined by their company and the needs of employees—the same way every RTO plan should be established, she argued.
“This whole debate is the wrong one,” Lovich said. “The debate is: How do we create working models where people can be in it together and deliver their best?”
