Do CEOs really stay in the job for too long?

Text Letter of Resignation typed on retro typewriter

Research shows that the value that CEOs create for shareholders starts to decline after 14 years in the job, but letting them go early may not always the best decision.

How long should CEOs remain in office? And do some of them stay on for too long? This is an ongoing debate among academics and practitioners, often triggered by headlines about long-serving CEOs who perform badly and destroy company value. A recent example is Société Générale’s Frédéric Oudéa, who is currently the longest-serving CEO of a major European bank despite having overseen a 75% drop in the company’s share price during his 13-year reign, giving it the lowest price-to-book ratio of any European bank.

After nine years at the helm, UBS’s board of directors decided to replace Sergio Ermotti with Ralph Hammers, even though Ermotti’s final year in the role, 2020, ended up being the most successful in the bank’s recent history, raising the question of whether he was let go too early. Over on Wall Street, bosses appear to be digging in for the long-term. In September, Bank of America CEO Brian Moynihan signaled that he intends to stay in the role until the end of the decade, while the chief executives of JP Morgan Chase and Morgan Stanley have also indicated that they plan to spend lengthy periods at the top.

Can academic research inform this discussion and provide guidance on how to deal with CEO tenure and turnover issues? Looking at previous academic research on the topic, a mosaic of empirical evidence suggests that corporate outcomes – such as earnings management, firm-customer and firm-employee relationships, innovation, net investments, and profitability – vary…

Magazine

Do CEOs really stay in the job for too long?

Research shows that the value that CEOs create for shareholders starts to decline after 14 years in the job, but letting them go early may not always the best decision.

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Magazine

Do CEOs really stay in the job for too long?

Research shows that the value that CEOs create for shareholders starts to decline after 14 years in the job, but letting them go early may not always the best decision.

Do CEOs really stay in the job for too long?

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