The 'CEO effect' overblown, researcher says

More than 70 percent of a chief executive officer's influence over a company's performance can be attributed to luck, according to a study published in the Strategic Management Journal. The "CEO effect" is so much smaller than many assume because the typical tenure of a CEO is too short to have advantageous and harmful outside events that affect the company balance themselves out, according to Markus Fitza, the researcher behind the study. Organizations should keep these findings in mind when looking at the way they hire, fire and compensate CEOs, Fitza told Texas A&M Today. "For example, they draw attention to the volatile environment CEOs are working in and question the current trend towards shorter CEO tenure," he said, adding, "It might not be a good idea to replace CEOs because of low firm performance over short time periods, such as after one bad year." Article

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