Ceo Turnover Case Study

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Throughout the last years there has been an increase in the CEO turnover rate (see Kaplan/Minton 2006: 2). The board, the committee which oversees appointing and dismissing the chief executive officer of the firm, gets confronted with a difficult decision if the firm performance decreases. It has to evaluate whether or not the CEO is at fault for the bad performance and if a CEO turnover is going to yield an improvement of performance. Typically, the firm performance is considered to be the most significant measure for evaluating a CEO. The ambiguous part of evaluating performance is assessing in what ways the CEO is responsible for it and how a CEO turnover is going to improve firm performance. Therefore, board members must be careful not to rely on firm performance only because the CEO cannot influence some of the factors affecting it.…show more content…
One of these factors is the tenure of a CEO. The tenure, which is how long the CEO has been holding office for, seems to have a direct impact on the board’s decision of dismissing a CEO for bad firm performance. Even though there are a lot more influences other than firm performance and CEO tenure, these are the two influencing factors that I want to elaborate on in this bachelor thesis. I find their relationship to be the most interesting one and, since the average CEO tenure shows a tendency of declining, the most relevant one (see Kaplan/Minton 2006: 2). Thus, the research question being in the focus of this thesis is: How does bad firm performance in relation to CEO tenure affect the forced CEO turnover

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