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  • Glenn D. Surowiec

Missionary vs. Mercenary Leadership


Q: The essay “How GDS Invests” explains the thought process behind curating a value-driven investment portfolio. One piece of that process is asking, “Are the company’s leaders missionaries instead of mercenaries?” What does that mean?

Value investors prioritize long-term value over short-term gains, and we want business leaders to share a similar focus on long-term versus short-term.


I think of a mercenary-type leader as someone who tries to do something very quickly, often at the expense of someone else (like their own customers). To be clear, mercenary CEOs can be successful in the short-term. It’s their long-term prospects that are more uncertain.


A quintessential example of a mercenary-style leader might be “Chainsaw” Al Dunlap. He had a reputation as something of a “CEO fixer.” He would come in, lay off a lot of people, do a lot of cost-cutting, etc. But his methods were questionable and, possibly, illegal. For example, in 1996 he took over as CEO at Sunbeam, a company specializing in lifestyle products and home appliances; a year later, the company saw record earnings of $169 million. However, the U.S. Securities and Exchange Commission accused him of serious accounting fraud. Ultimately, Sunbeam was forced into bankruptcy in 2001.


However, this is admittedly an extreme situation. Not all mercenary-style leaders engage in illegal behavior. Then again, it doesn’t take outright illegality to cause problems either.


A mercenary approach can cause fragility because it often creates opportunity for competitors to gain advantage. This is another area where cable companies are a good example. For a long time, cable’s business model was extremely sticky, in that their customers were stuck with them whether they liked it or not. It turns out a lot of those customers did not like it. Service was poor, wait times were long, and fees were high.


That created an opening for new entrants – streaming services – to undercut the cable companies. If cable providers had redirected more investment toward things that were customer enhancing, they might be in a different place now. Instead, they seem to be succumbing to a “slow death.”


By contrast, I think of a missionary-type leader as someone who's there for all the right reasons and who don’t hoard their financial gains but instead reinvests them to accrue to customers and shareholders alike.


A good example would be Netflix CEO Reed Hastings, who has been able to successfully capitalize on the failures of his competitors. So is Amazon founder Jeff Bezos. These are both world-class leaders who are motivated by doing the right thing for customers and have pushed their companies to provider better and better customer experience. They are also leaders who can resist the temptation to see success today as a steady state that will continue indefinitely; they do not rest on their laurels but instead focus on constant reinvestment in customer experience.


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Glenn D. Surowiec
Registered Investment Advisor
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