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Is There Such Thing as an Optimal CEO Tenure?
Jaap de Jonge, CEO, Netherlands, Editor
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...
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Reduction of CEO´s Dynamics and Shareholder Returns
Juergen P. Mueller MBA, Business School Marketer, Germany, Member Indeed it is important to look out for companies where CEOs have returned to be managers. Nothing new about these results according to standard busine... |
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The Best Length of Tenure for a CEO
Andrew Blaine, Business Consultant, South Africa, Member In my opinion, the optimal length of tenure for a CEO can only be determined based on the following four questions:
1. What is the current state ... |
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