As more companies demand that hapless employees return to the office five days a week—think of Amazon and Dell recently—a starkly different trend has gone unnoticed: The number of CEOs who live hundreds of miles from headquarters, typically flying to the office for a few days a week, has been increasing for years.
Recent comprehensive research finds that the arrangement generally doesn’t work well. Long-distance CEOs underperform on average. The research also confirms suspicions that many workers may have harbored about fly-in CEOs. For example: If they own a boat, they tend to underperform even worse. And if they live within ten miles of a really nice golf course? Don’t even ask.
A high-profile example of the super-commuter CEO—for whom it’s far too early to assess performance—is Brian Niccol, who in September left Chipotle to become Starbucks’ new chief. A Starbucks jet shuttles him between home in Newport Beach, California, and headquarters in Seattle, a distance of about 1,000 miles each way. He isn’t required to be in Seattle for any specific number of days per week.
Long-distance CEOs apparently increased during the pandemic, but they have been multiplying since long before. They more than doubled as a percentage of all public company CEOs, from 4% to 9.5%, between 2000 and 2019. So say Ran Duchin, a professor at Boston College, and Denis Sosyura, a professor at Arizona State University, in a deep study of the phenomenon. In total, 18% of public companies had a long-distance CEO for some part of that period—a total of 929 long-distance CEOs whom the researchers identified and studied.
The research is valuable because it examines how CEOs perform in that arrangement, and the answer is clear: On average, poorly. As soon as they take over as a long-distance chief, “there is a rapid and persistent decline in firm performance,” the researchers find. Return on assets drops, as does the company’s value. It isn’t because those CEOs are generally inept; some of them ran the same company while living near HQ and at another time as a remote boss, and they performed much better when they were nearby. Nor did evidence suggest the company was in trouble before the long-distance CEO took over. The problem seems to be the long-distance factor, and the longer the distance, the weaker the company’s performance under the fly-in CEO.
So why do boards of directors hire a CEO who lives far away and intends to stay there? The answer is ironic and kind of sad. The researchers find that long-distance CEOs are more likely than the local talent to have graduated from an Ivy League school and to have a graduate degree; they have more CEO experience, more external board seats, and a bigger network. If such a candidate insists on a superlong commute, the directors apparently feel the only way they can snag this fantastic leader is by agreeing. Yet on average, it’s all for naught.