Is There Such Thing as an Optimal CEO Tenure?

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			              Is There Such Thing as an Optimal CEO Tenure?
Jaap de Jonge, Management Consultant, Netherlands
In an interesting article "Long CEO Tenure Can Hurt Performance" (HBR March 2013) by Professor Xueming Luo, Vamsi K, Kanuri and Michelle Andrews results are disclosed from a study the authors did among 356 US companies between 2000 to 2010 analyzing the correlation between CEO tenure (~length of time serving in position of responsibility) and total shareholder returns.

The researchers found that CEOs create most shareholder value in their first years and argue this due to 2 factors:

- The firm-employee dynamic - This keeps improving the longer a CEO serves, growing shareholder value.

- The firm-customer dynamic - This strengthens only for a time and then weakens.

The optimal length of time served reported (for this group of companies in this period!) was actually 4,8 years...

Boards are advised to stimulate long-tenured CEO to keep spending a lot of time and effort on the firm-client relationship. To achive this, incentives plans for such leaders should focus h... Read more? Sign up for free
			            
			                  			Reduction of CEO´s Dynamics and Shareholder Returns

															Juergen P. Mueller  MBA, Business School Marketer, Germany, Member
			                  		
			                  			The Best Length of Tenure for a CEO

															Andrew Blaine, Business Consultant, South Africa, Member
			                  		
											Read all responses and join this discussion yourself. 
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Is There Such Thing as an Optimal CEO Tenure?

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