SUCCEEDING AT SUCCEEDING AT SUCCESSIONSUCCESSION

ZEYNEP BERBEROGLUZEYNEP BERBEROGLU

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Boards face challenge Boards face challenge in picking the CEOin picking the CEO

Succession decisions have been Succession decisions have been guided by guided by

too little datatoo little data

too much reliancetoo much relianceon rules of thumbon rules of thumb

anecdotesanecdotes

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Spencer Stuart’s Spencer Stuart’s StudyStudy

Insiders and Insiders and outsiders have outsiders have performed about the performed about the samesame

Directors turned Directors turned CEOs represent a CEOs represent a strong blend of strong blend of insider and outsider.insider and outsider.

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The The WWorst orst PPerforming erforming CEOs CEOs

“ “ IInsider-nsider-OOutsiders ”utsiders ” They They

promoted to promoted to CEO within 18 CEO within 18 months.months.

The process The process requires requires “audition“audition””

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Ten insider-outsider CEO’s Ten insider-outsider CEO’s were appointed between were appointed between 2004 and 2008, and our 2004 and 2008, and our analysis found that none analysis found that none of them achieved top-of them achieved top-quartile performance.quartile performance.

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Criterias Criterias About Evaluate About Evaluate

CEO CEO CandidatesCandidates

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Insiders are best when the Insiders are best when the company is performing company is performing

well.well.

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Outsiders Outsiders do better do better when the when the company company

is in is in crisis.crisis.

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Examples of insider Examples of insider and outsider CEOsand outsider CEOs

At Disney, longtime At Disney, longtime executive Robert Iger executive Robert Iger succeeded Michael succeeded Michael Eisner in 2005.Eisner in 2005.

Philip Schoonover at Philip Schoonover at Circuit City in 2006Circuit City in 2006

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ConclusionConclusion

Selecting CEO is complex desicion. Selecting CEO is complex desicion.

Insider = outsider Insider = outsider same performancesame performance

Companies should be careful about Companies should be careful about CEO selectionCEO selection

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