It sometimes seems the CEO's office at large corporations ought to be equipped with a well-oiled revolving door. As the face of embattled companies, CEOs get the lion's share of blame when things go awry, and often it's their jobs on the line.
Soon you'll be able to wager on their future employment prospects. A U.K.-based online betting exchange called Betfair.com is launching a special market to track sentiment on the employment prospects of 10 Canadian CEOs.
The list includes some big names — including Air Canada's Robert Milton, Nortel's William Owens and Gordon Nixon at RBC — each of whom is operating under intense pressure. Betfair will let punters bet for or against the possibility that the companies will have announced their CEO's departure before April 30. (The CEO's exit has to be set within six months of the announcement to qualify as having left.) “We're not bookmakers; we don't set the odds,” says Jordan Ferguson, Canadian country manager of Betfair. “Because the market is driven by users, it should be a true barometer of public sentiment concerning the likelihood of these CEOs having length of tenure.”
Here's how it works: Betfair acts as a neutral exchange, aggregating bets like a stock market into pools of liquidity, rather than one-to-one matching. The odds shift dynamically, providing sophisticated “traders,” as Betfair calls them, the chance to lock in small profits through hedging strategies taking both sides on a possible outcome — in this case, whether the CEO will retain his job. Betfair takes a commission of between 2% and 5%, based on a client's activity, but only on winning bets.
The system, which was created in 2000 by a couple of blokes — a computer programmer and a former securities trader — has already revolutionized Britain's lively sports betting scene, undercutting the licensed bookies' 20% commission with better odds. With its commitment to maintaining “know your client” rules and audit trails, it has legitimized betting online. In 2003, Betfair won a Queen's Award for Enterprise, and runs more than 20,000 liquid markets every month, almost all of it sports-related. Last June, it ran a popular novelty market based on Canada's election. It has also run a market based on British CEOs, which attracted global interest.
Ferguson wants this market to be as active and volatile as possible. That's why Betfair has included the less familiar name of Arthur Millholland of Oilexco Inc., a small-cap company with oil wells in the North Sea. Its volatile stock is listed on the TSX Venture. “While it's not widely known,” says Ferguson, “the inclusion of Oilexco will generate a great deal of interest among a sector of investing public that might not necessarily trade the likes of Bombardier and RBC Financial.”
Officially, Betfair can't be licensed to operate inside Canada due to online gambling laws. (It operates on servers in the U.K.) But Ferguson claims the Canadian client base is growing “exponentially” within its more than 300,000 total accounts.
Ferguson thinks reaction from the CEOs in question will be mixed. “By the time you get to being CEO of a public company, you open yourself up to unprecedented levels of public interest, criticism and/or support,” say Ferguson, “and this market is just an extension of the market in that way.”
Betfair's CEO market goes live on Dec. 1. Keep watching this space for updates.