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Remote Work for CEOs: A Growing Trend and Its Impact

The Growing Trend of Remote Work for CEOs and Its Impact

Companies are offering more flexibility for incoming leaders: No need to move to the company HQ? No issue.

Starbucks’ new CEO, Brian Niccol, living in California, won’t be required to relocate to Seattle. Similarly, Hillary Super, Victoria’s Secret’s incoming chief, will work remotely, highlighting a trend among top executives working from various locations.

This flexibility is attractive to executives who want to balance work with family time. However, some experts foresee potential challenges: employees might resent their remote boss, and it could negatively affect the company’s performance.

Historical Concerns with Remote Leadership

The debate over remote work for executives isn’t new. For example, Sears CEO Eddie Lampert faced criticism for living in Florida while rarely visiting the Illinois headquarters rarely visiting. Similar critiques were aimed at former JC Penney CEO Ron Johnson, who did not relocate to Texas in 2013 during the company’s sales troubles.

Research on Remote CEOs

A 2021 study by finance professors Ran Duchin and Denis Sosyura examined over 900 companies with remote-working CEOs. They found that these companies had lower return on assets and market-to-book ratios compared to those with in-person CEOs. This implies that companies led by long-distance CEOs often underperform their counterparts.

Additionally, employee comments on Glassdoor revealed that remote CEOs were perceived as detached from the employees and company operations.

“The perception was that the CEO enjoyed life at the expense of employees and shareholders,” Duchin told Fortune. “It’s disheartening to see the CEO use the company jet between his beach house and headquarters.”

Considerations and Limitations

There are limitations to this research, as it analyzed pre-pandemic data, before remote work tools became widespread. However, the trends identified could still be relevant today. The study’s findings don’t imply that companies with remote employees suffer the same consequences as those with remote CEOs. Employees resenting their remote CEOs might reflect proximity bias. Frank Weishaupt, CEO of Owl Labs, noted that employees may not realize the extent of their CEO’s remote work.

“If employees don’t work closely with the CEO, they may not see how much leaders are actually working,” Weishaupt told Fortune.

Debbie Lovich, senior partner at the Boston Consulting Group, emphasized that CEOs inherently need to travel and work remotely to oversee company operations effectively.

“CEOs need to be where the work happens, whether it’s in a manufacturing plant, a store, or on the tarmac,” Lovich stated.

Exceptions to the Rule

Despite the trend, for globally dispersed companies, a CEO’s physical presence at headquarters is impractical. Duchin’s study showed that remote work for CEOs of large global firms did not impact performance outcomes. This also applies to CEOs who work in company offices away from the main headquarters.

For instance, Niccol, managing Starbucks’ 400,000 employees across 87 countries, spends more time meeting investors and visiting stores than sitting in Seattle HQ, according to Stanford University professor Nick Bloom.

“With access to a private jet, Niccol’s global workplace is different from the typical employee’s,” Bloom explained to Fortune.

Niccol’s offer doesn’t require relocation, but he might still purchase a Seattle home while spending most time traveling or at the company’s Support Center. When he started at Chipotle, the company relocated its headquarters near his California home.

A Starbucks spokesperson stated, “Brian’s schedule will exceed hybrid work guidelines and workplace expectations.”

Victoria’s Secret CEO Super has a similar arrangement, working from New York instead of Columbus, Ohio. Many executives are based in New York, which the company considers another headquarters. This setup is practical and cost-effective for companies like Starbucks.

Understanding the Trend

The expectation for CEOs like Niccol and Super to work remotely isn’t just a pandemic-driven change. Pre-pandemic, many CEOs resisted moving to headquarters. The trend acknowledging that hybrid work is here to stay, offering flexibility while maintaining necessary face-to-face interactions for decision-making.

However, not all CEOs favor remote work. For instance, Zoom CEO Eric Yuan noted that remote meetings hinder innovation, while remaining flexible is crucial.

Each CEO’s work schedule should align with the company’s needs, argued Lovich. The focus should be on how to foster effective work environments, not on rigid norms for office presence.

“The real debate,” Lovich concluded, “is about creating work models where everyone can thrive and deliver their best.”

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