Management Turnover as Change Agent

Tuesday, March 30, 2010

Investors' Management Change Conundrum - Inside or Outside CEO?

Academics, investors, human resources, board members, corporate executives all have their own opinion on whethdr it is best to outside for a new CEO or hire from within. Liberum continually covers research that points to different conclusions on this question. A new report has come out that claims outside CEO hires tend to increase corporations’ market value. According top a story in Canada’s Globe and Mail, Spencer Stuart, the executive search firm, examined

… the track records of 210 new CEOs of large Canadian companies hired between 1995 and 2006, and measured how much the companies gained in share price during the CEOs’ first three years at the helm.

The results show better performance for CEOs hired from outside in all scenarios, but most especially when the firms are struggling and have forced out their existing CEOs.

The report challenges a view in corporate governance circles that CEOsuccessions work best when internal candidates are selected because they already know the company and need less transition time.

Anyone interested in this issue should contact Spencer Stuart to find out more about the study.

1 comment:

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