Warren Buffett has proposed a simple test of capital allocation ability: has a CEO created at least a dollar of value for every dollar of retained earnings over the course of his tenure? Buffett’s metric captures in a single number the collective wisdom and folly of decision-making over the course of an entire career. Sadly, it is a tougher test than it sounds and not surprisingly, these outsider CEOs passed with flying colors, as table A-1 demonstrates.
TABLE A-1
Outsider CEOs and the Buffett test
* The General Cinema data adjusts for extreme swings associated with the 1991 Harcourt General acquisition, which otherwise ...
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