By Whitney Heins
James Cayne had a reputation for indulging in leisurely activities—specifically, playing golf and bridge.
According to a report in the Wall Street Journal, Cayne—who at the time was CEO of securities trading and brokerage firm Bear Stearns—would take three-and-a-half-day weekends throughout the summer to hit the links. When he wasn’t swinging his nine iron, Cayne could often be found at competitive bridge tournaments.
One July afternoon in 2007, two Bear Stearns hedge funds began hemorrhaging value and were on the verge of collapse. Meanwhile, Cayne was incommunicado as he pulled up his chair to a bridge table in Nashville. Eventually, both funds folded—a prelude to the global financial meltdown just months later.
Many questioned whether those funds would have survived if Cayne had spent more time at work instead of out having fun. “The idea that delegated managers will shirk their duties is as old as the discipline of economics itself,” said Andy Puckett, associate professor of finance and the Paul and Beverly Castagna Professor of Investment in UT’s Haslam College of Business.
The trouble arises from the structure of an important component of the capital markets system—the corporation. In these organizations, the owners of the firms are separate from those who manage the day-to-day operations. Unlike the business owners, the managers don’t have as much at stake if the business fails.
“As long as the owners’ and managers’ incentives match exactly, everything works out great,” Puckett explained. “But this does not represent reality. Reality is that when a manager is hired, there is risk that they won’t complete the task with the level of diligence expected.”
While this assumption has been around for hundreds of years, there has been little empirical evidence to support the theory. “A convincing way to measure the amount of leisure these managers consume has eluded economists for decades,” Puckett said. “Occupants of the C-suite don’t punch a time clock, so we don’t have their schedules at our fingertips.”

Determined to remedy this lack of data, Puckett collaborated with Lee Biggerstaff and David Cicero to design a study using a novel measure of leisure consumption—the amount of golf chief executives play.
“We argue that time spent on the golf course is a reasonable proxy for leisure consumption, both because of the large number of CEOs who list golf as their preferred outlet for leisure and because golf commands a significant time commitment—about four hours to complete a round,” Puckett explained.
To begin the process, the team hand-collected golfing records for 363 CEOs from a database maintained for handicapping purposes by the United States Golf Association. The data included rounds, scores, and other details for participating golfers from 2008 to 2012.
This treasure trove was then used to fuel various statistical analyses investigating the relationship between golfing and firm value, and golfing and CEO incentives. What they found is that most CEOs play “a negligible amount” of golf. The median is ten rounds a year. But there was a minority that played a lot of golf.
The results showed that CEOs in the top quartile played a minimum of twenty-two rounds a year, while those in the top decile played at least thirty-seven. A few played over a hundred, and the most prolific CEO completed an astonishing 146 rounds.
“That much golf takes a lot of time,” Puckett said. “Using conservative estimates, the top quartile of CEO golfers in our sample spent the equivalent of twenty working days on the golf course.”
But what about the idea that business is done on the links?
The researchers discovered that CEOs who played twenty-two or more rounds of golf a year had significantly lower firm operating performance. Specifically, the return on assets for their companies was about 20 percent lower than at comparable firms.
“While some golf rounds may clearly serve a valid business purpose, it is unlikely that the amount of golf played by the most frequent golfers is necessary,” Puckett said. “Ultimately, the shareholders are paying a financial penalty when CEOs spend too much time on the green.”
Will CEO shirking remain par for the course? Perhaps not.
“Having skin in the game matters,” Puckett said. “The more companies align their managers’ interests with those of their principals, the more likely managers are to work harder.”
In fact, the researchers found that CEOs tend to play fewer rounds of golf when they have stock ownership in the firm and when their personal wealth is tied more closely to firm performance.
Another interesting correlation from the study shows that for every 1 percent a CEO increases their golf time, they increase their chances of getting fired by 0.83 percent. On the other hand, CEOs who discontinue their heavy golf play usually see a turnaround in firm performance.
“CEOs who continue to shirk their responsibilities and hit the links—watch out. Boards of directors are much more likely to tell these executives that they are fired,” Puckett warned.
Maybe leisure consumption is something more shareholders and search firms should investigate before hiring new executives. It just might prevent a candidate’s low golf handicap from becoming a major financial handicap for the company.