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Beware of Typhoons--and 'Tycoon' ceos. (Business Briefs).

Typhoons, as meteorologists know, are highly dangerous. And so, says Oliver Wyman & Co., are tycoons.

The New York-based consulting firm has created a "Tycoon Index" to measure what it says may be a propensity for a company to suffer from the excesses of a high-profile CEO who was largely responsible for building the firm.

"Each of the big recent failures was run by a CEO who presided over more than 86 percent of the revenue growth at 'his' company," Wyman wrote in a recent analysis.

Moreover, Wyman says, almost half of the companies with a very high Tycoon Index have defaulted.

Essentially, the company argues, tycoons do exceptionally well in boom times, building an empire "financed by willing banks, bondholders and shareholders that buy into the story." But when markets turn bearish, "it is these very same companies that disproportionately implode." As overvalued assets are exposed, deal-maker CEOs are unable to manage through a trough in profitability and liquidity, and too many CEOs cling to the empires they have built and refuse to make the hard decisions.
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Publication:Financial Executive
Article Type:Brief Article
Date:Dec 1, 2002
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