The CEO as an Investor: The Capital Allocation Officer
A CEO may have never tackled a capital allocation job in previous jobs, while now, on his top position, he is responsible for the capital deployment of 50% of the firm market cap over a 3 to 5 year period. CEOs' experiences usually come from the industry and not from capital allocation. Furthermore, boards focus more on loyalty and prudence than on value creation, the laser-focus of private equities and value investors. The Capital Allocation Officer role has also had limited coverage in media and corporations. CEOs need to recognize that proper capital allocation is a strong value driver, that need to be involved in such process regardless of their preferences and knowledge, and even learn from or hire excellent capital allocators. CEOs need to design an investor-based capital allocation framework that guides their decisions and facilitates board's long term value creation.
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