What Do CEOs Do?
Executive Summary — If time is money, as the old adage goes, then a CEO's schedule is especially important to a firm's financial success. This raises a fair question: What do CEOs do all day? To that end, researchers followed the activities of 94 CEOs in Italy over the course of a pre-specified week, enlisting the CEOs' personal assistants to track their bosses' activities with time-use diaries. Research was conducted by Raffaella Sadun of Harvard Business School, Luigi Guiso of the European University Institute, and Oriana Bandiera and Andrea Prat of the London School of Economics. Key concepts include:
- Compared with CEOs who work shorter hours overall, CEOs with longer workdays tend to devote more time meeting with other employees within the company and less time meeting with outsiders.
- The better the firm's governance structure, the more likely it is that a CEO will spend more time meeting with insiders than outsiders.
- The findings show a strong correlation between hours worked and productivity—a 2.14 percentage point increase in productivity for every one percentage point increase in hours worked. That positive correlation is driven entirely by the time a CEO spends with company insiders.
- Time spent with insiders is correlated with profits; time spent with outsiders is not. A possible interpretation is that spending time with outsiders might be more beneficial to the CEO than to the firm.
We develop a methodology to collect and analyze data on CEOs' time use. The idea—sketched out in a simple theoretical set-up—is that CEO time is a scarce resource and its allocation can help us identify the firm's priorities as well as the presence of governance issues. We follow 94 CEOs of top-600 Italian firms over a pre-specified week and record the time devoted each day to different work activities. We focus on the distinction between time spent with insiders (employees of the firm) and outsiders (people not employed by the firm). Individual CEOs differ systematically in how much time they spend at work and in how much time they devote to insiders vs. outsiders. We analyze the correlation between time use, managerial effort, quality of governance and firm performance, and interpret the empirical findings within two versions of our model, one with effective and one with imperfect corporate governance. The patterns we observe are consistent with the hypothesis that time spent with outsiders is on average less beneficial to the firm and more beneficial to the CEO and that the CEO spends more time with outsiders when governance is poor.