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Jaap de Jonge, Editor, Netherlands
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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 heavily on consumer a (...) Read more? Sign up for free
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Juergen P. Mueller MBA, Business School Marketer, Germany
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Reduction of CEO´s Dynamics and Shareholder Returns
Indeed it is important to look out for companies w (...)
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Andrew Blaine, Business Consultant, South Africa
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The Best Length of Tenure for a CEO
In my opinion, the optimal length of tenure for a (...)
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