What happens to the CEO?
Associate Professor Camelia Kuhnen explains when and why new leadership might be a firm’s best decision By Daniel P. Smith
8/31/2012 - Should the CEO stay or go?
In an audio INSIGHT in Person interview, Associate Professor of Finance Camelia Kuhnen
explores how industry conditions factor into that decision.
Studying the patterns behind CEO firings, Kuhnen found that CEOs were most likely to be replaced when the firm faltered relative to industry peers or when the entire industry sputtered.
Kuhnen noted that there are some circumstances that would increase the likelihood of a firm retaining its CEO during an industry downturn — most notably, when he or she holds unparalleled knowledge of the firm. But moving on might be best when the CEO’s “firm-specific skills” fail to match the organization’s needs in a shifting industry climate, she said.
“For the majority of firms, a CEO is replaceable in the sense that what he knows about the firm, someone else new can learn in not too long a time,” Kuhnen said during the interview.