Love by calculation: how investors' attitudes toward company leaders affect stocks

Corporate leaders can have a huge impact on how markets value stocks. Whether they are strategic or micromanaging, whether they are innovative or conservative, and even their media and political activity can make a big difference in a company's trajectory. Naturally, all this does not go unnoticed by investors;

For Tesla investors, the last six months have been like a roller coaster ride. The company's shares reached a historic peak in mid-December 2024, and by April 8 they had already collapsed from their highs by more than 50%. Then by the end of May, they were up more than 50% again. Then, on June 5, they fell in price by 14% in just one day, by now they have recovered most of these losses, but have not fully recovered. All this time, the market's attention was focused not so much on the operating and financial results of the electric car manufacturer as on the events surrounding the company's CEO, Ilon Musk.

Consumer disillusionment with Tesla came after he spent nearly $300 million on the Trump and Republican election campaigns, thereby «buying» himself a seat in the administration. The Department of Government Efficiency (DOGE), which Musk headed, has engaged in massive cuts to government employees and a crackdown on diversity, equity, and inclusion policies. This sparked massive demonstrations against Tesla in Democratic New York, led to the shooting of a car dealership in Oregon, damage to more than 80 cars at a dealership in Canada, and a host of other such events. 

In many countries, potential consumers have reconsidered plans to buy Tesla because of Musk's political activism. Electric car owners began finding notes urging them to switch cars soon. Some of them placed stickers on their cars such as «Against Musk,» «Bought before Ilon went crazy,» and «This Tesla doesn't support fascists.»

Musk's politicization, in the words of Wedbush analyst Dan Ives, has taken a huge toll on the company. In IQ 2025, Tesla's deliveries fell 13% year-over-year and 32% from the previous quarter, to the lowest level in three years. Investors who once counted on Musk's closeness to Trump to prove beneficial to the company have been disappointed. Tesla shareholder Ross Gerber said, «The brand is tainted, and perhaps irreparably so. 100% of the responsibility lies with the board of directors.»  

Tesla's problems aren't just Musk's. Investors are worried about the growing competition from Chinese manufacturers, which are rapidly developing and introducing new models. However, the CEO's actions have multiplied the impact of these trends on the stock. Thus, earlier this month, a stormy quarrel between Tesla CEO and Trump shook quotes, and the subsequent post of the CEO with apologies helped the securities to recover some of the losses.

Stocks have always traded on news about Musk, says Phoenix Financial Services chief market analyst Wayne Kaufman: «When Musk seemed like a visionary, there was a rally. When he took over DOGE, they were dumped. When he left DOGE - they recovered.» In the case of Tesla, the value of the company cannot be separated from its leader, Kaufman notes. 

Both «falling in love» and investors' dislike of top managers do not come from thin air. According to the the theory of the «upper echelons» presented by American scientists Donald Hambrick and Phyllis Mason, CEOs of companies bring with them a unique set of competencies, values and personality characteristics that inevitably affect actual business results. In an attempt to predict how this might be reflected in stock performance, other researchers have subsequently analyzed a variety of different parameters, from the managerial styles and character types of top executives to specifics such as dialect or face structure.

Firms of «conscientious» CEOs tend to have lower stock volatility but are able to achieve higher returns at higher levels of risk, confirms Joseph Harrison of the University of Tennessee. «In contrast, firms of more neurotic and extroverted CEOs tended to exhibit higher stock volatility, but were less able to translate this higher risk into higher returns to shareholders.»

The same traits of a top manager can affect an organization in opposite ways. For example, a CEO's excessive confidence may correlate with a greater propensity for innovation, which investors tend to favor. But this same quality increases the risk of suboptimal decisions and cash flow volatility, which negatively impacts stock returns.

Overconfidence is destructive to both companies and civilizations, «whether it's ancient Greece or modern Silicon Valley,» said Microsoft CEO Satya Nadella. His own management principles illustrate the thesis that empathy and management values can positively influence stock performance.

In early 2014, when Nadella took over Microsoft, the company was had fallen on hard times. It had missed an opportunity to enter the mobile market, Windows 8 had failed, and the PC market was in decline. Inside the company, there was fierce competition between departments and a wary attitude toward new ideas.

Five years later, Microsoft's market capitalization has more than tripled to more than $1 trillion, and now stands at about $3.7 trillion. Nadella has dramatically changed the corporate culture by encouraging employee collaboration and a willingness to constantly learn, encouraging an «eager to learn» attitude instead of an «already know it all» attitude;

The company as a whole began to behave in a similar manner. Instead of trying to shut out competitors, Nadella has relied on partnerships to expand its user base. So, the company began offering its Microsoft Outlook email service for Apple and Android devices, and M&A deals, including the acquisition of LinkedIn, were an additional way to tap into new markets. Microsoft is seen as a leader in commercializing India products, Bloomberg wrote - the company has succeeded thanks to its partnership with OpenAI and the introduction of its own AI assistant, Copilot, into its Office suite of applications.

The cultural revolution has been complemented by forward-thinking strategic initiatives, such as the development of cloud services. The company's latest financial report showed that demand for its cloud solutions remains robust despite tariff wars and an uncertain economy. 

Strategic leaders who align current decisions with a long-term vision for the company often achieve higher results (including for shareholders) than managers who focus too much on siloed operational tasks, a Harvard University study found. A vivid illustration is the case of Lisa Su, head of Advanced Micro Devices (AMD), who was named CEO of the Year in 2024 by Time magazine. 

When she took over AMD in 2014, the semiconductor manufacturer was on the verge of bankruptcy. Its share of the data center chip market had shrunk to almost zero, and stock prices were approaching historic lows. Since then, the securities have grown about 4050 times, and the total capitalization in 2022 overtook Intel for the first time.

Lisa Su, a graduate of MIT with a degree in electrical engineering, achieved these results by focusing on the development of technologies for high-performance computing. The new strategy didn't bear fruit immediately, but by the time cloud computing, data centers, AI, and gaming became dominant, AMD was ready to deliver advanced chips for these purposes. «The most important thing for us in 2014 was to pick the right markets that are promising for technology,» said she in an interview with CNN. - People really pay attention not to what you do today, but what you do year after year.»

The views, preferences and decisions of top executives are so important that some CEOs become the personification of their companies to consumers and investors. Not surprisingly, news of CEO turnover can have a big impact on stock performance, doubling daily volatility by half. But over a longer horizon, their impact wanes. Interestingly, changes in presidents, board chairs, CFOs and COOs affect volatility to a lesser extent, according to a study by economists at Oakland University and the University of North Alabama. 

Steve Jobs transformed Apple from a near-bankrupt company into a technology empire that revolutionized the personal computer and mobile device markets, as well as the music industry. In doing so, he (like Musk or Amazon CEO Jeff Bezos) was known for his impulsiveness and volatility, two hallmarks of neuroticism, wrote Forbes. He paid attention to minute details and fascinated with micromanagement, the BBC described him. 

Still, when Jobs stepped away from Apple's helm due to cancer, investors around the world worried about what would happen to the company without his visionary ideas and focused strategy. But the stock, which had plummeted several times on news of Jobs' health problems, responded to the resignation itself with only a short-term decline. Perhaps over time, investors became used to Jobs' sick days and began factoring them into quotes. The well-thought-out plan to hand over management to Tim Cook also helped maintain confidence: he had been prepared for it since being named chief operating officer in 2005.

The new CEO's management style and character were markedly different from what attracted investors to the charismatic Jobs. But that didn't stop them from endorsing the successor as the company performed impressively. Under the new CEO, Apple didn't create the same revolutionary devices as before, but Cook managed to significantly expand its lineup of digital services and ensure steady revenue from subscriptions even as iPhone sales slowed. During his tenure, Apple's quarterly revenue more than tripled to $95.4 billion and its capitalization more than eightfold to $3 trillion;

It's true that Apple's stock is down nearly 20% this year. Much of that is due to external factors - Donald Trump's tariff wars are hitting the company because of its reliance on imports and assembly overseas, mostly in China. But some analysts have expressed concerns about a lack of AI-related innovation and simply new products. «The company is no longer growing like it used to, and its multiples remain at high levels. Even without the political backdrop, those are good reasons to hold an undervalued portfolio position on it,» admits Randy Hea of Huntington National Bank, for example. 

Perhaps Cook is changing Apple's business model too slowly and will still need Jobs' pioneering spirit to win back investor favor.

This article was AI-translated and verified by a human editor