Big House, Bad CEO?

First, you must allow me my proud dad moment. Last week, we welcomed into the world Hope Caroline Hodge. We are sleep deprived but feel extremely blessed. God is good.

William- my French journalist friend- passed along an article that is interesting: Haunted Mansion. The article explores the link between CEO real estate purchases and the performance of that company's stock among S&P500 companies.

The article can be read here: http://www.slate.com/id/2162989?nav=tap3.

The debate is whether a CEO buying a large, elaborate house is a commitment to continue to work hard to pay for this home? Or does it signal complacency towards costs and distraction from the demands of running a company?

Two professors- David Yermack of New York University and Crocker Liu of Arizona State University- studied the home buying behavior of CEOs of S&P500 companies. This is what they found:

• The average home was 6,145 square feet and valued at $3.1 million.
• CEO's who lived in above average homes returned 3.35% per year less than companies whose CEOs lived more modestly.
• CEO's who lived in homes over 10,000 square feet underperformed their peers by 6.9% per year.

To me this is interesting stuff. From personal experience it rings true. I don't (nor plan to) own a boat or second home. I don't think owning these things is sinful. But I understand fully the distractive nature of possessions. I firmly believe that God created us to be free from the clutter of stuff and yet we have sought out ways to complicate our lives- Ecclesiastes 7:29.

Our family is in the final stages of constructing a new home and although the home is less than 1/2 of the square footage of the average CEO and about 10% of the cost, I constantly ask myself, "Is this worth the hassle?" My mind cannot even fathom taking on 10 times the financial commitment and all the headaches associated with that.

We would be wise to listen to the words of Henry David Thoreau in his book Walden, "Simplify, simplify, simplify." This means different things to different people. But this article about CEO homes and stock performance indicates that possessions have a distracting influence on our focus. Christ said, "Take care and be on your guard against all forms of greed because one's life does not consist of the abundance of possessions"- Luke 12:15.

For the Advancement of God's Kingdom and Glory,

Ashley Hodge