The Truth About CEO Tenure
The leaders on our 2019 list of the world’s best-performing CEOs demonstrate remarkable longevity. They’ve held their jobs for an average of 15 years, more than twice the average tenure of an S&P 500 CEO. They’ve prospered by outperforming their peers both financially and on increasingly important environmental, social, and governance measures. (Though once again, there’s a discouraging dearth of women on the list—a result of the dearth of women at the helm of public companies.)
Of course, no CEO—even the executives atop our ranking—can excel on all fronts all the time. This reality raises a question that boards and investors must deal with: How can you tell if a down quarter is a blip or the beginning of a long-term trend? More to the point, how do you know if it’s the right time for a CEO to step down? The conventional wisdom, at least among directors, holds that performance in a firm’s highest office plateaus just after nine years.
To find out whether that’s true, James Citrin, Claudius Hildebrand, and Robert Stark of Spencer Stuart tracked the year-by-year financial performance of nearly 750 S&P 500 chief executives and identified a clear pattern of headwinds and tailwinds over their tenure. On the basis of those findings, they argue that “some boards part ways with a strong CEO too early after a predictable and often temporary performance slump, while others tolerate a mediocre performer for too long.” As they note in “The CEO Life Cycle,” some CEOs enjoy their greatest years of value creation after their first decade in office—and that’s clearly the case with many of the executives in our ranking.
Of course, there’s no way to predict for sure whether someone will become one of these extraordinary leaders, but understanding the broader context can keep boards from over- (or under-) reacting in times of stress.
Wondering who came in first? Read “The CEO 100, 2019 Edition” to find out.
Adi Ignatius is the editor in chief of Harvard Business Review.
The Truth About CEO Tenure
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