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Succession 'Losers': What Happens to Executives Passed Over for the CEO Job?

6 Pages Posted: 9 Oct 2016 Last revised: 2 Dec 2016

David F. Larcker

Stanford University - Graduate School of Business

Stephen A. Miles

The Miles Group (TMG)

Brian Tayan

Stanford University - Graduate School of Business

Date Written: October 11, 2016

Abstract

Shareholders pay considerable attention to the choice of executive selected as the new CEO whenever a change in leadership takes place. However, without an inside look at the leading candidates to assume the CEO role, it is difficult for shareholders to tell whether the board has made the correct choice. In this Closer Look, we examine CEO succession events among the largest 100 companies over a ten-year period to determine what happens to the executives who were not selected (i.e., the “succession losers”) and how they perform relative to those who were selected (the “succession winners”).

We ask: Are the executives selected for the CEO role really better than those passed over? What are the implications for understanding the labor market for executive talent? Are differences in performance due to operating conditions or quality of available talent? Are boards better at identifying CEO talent than other research generally suggests?

The Stanford Closer Look series is a collection of short case studies through which we explore topics, issues, and controversies in corporate governance and executive leadership. In each study, we take a targeted look at a specific issue that is relevant to the current debate on governance and explain why it is so important. Larcker and Tayan are co-authors of the books “Corporate Governance Matters” and “A Real Look at Real World Corporate Governance.”

Keywords: Succession planning, leadership, chief executive officers, labor market, executives, board of directors, coaching, talent development, CEO turnover, corporate governance research

JEL Classification: G3, G30, G34

Suggested Citation

Larcker, David F. and Miles, Stephen A. and Tayan, Brian, Succession 'Losers': What Happens to Executives Passed Over for the CEO Job? (October 11, 2016). Rock Center for Corporate Governance at Stanford University Closer Look Series: Topics, Issues and Controversies in Corporate Governance No. CGRP-61; Stanford University Graduate School of Business Research Paper No. 16-44. Available at SSRN: https://ssrn.com/abstract=2849653

David Larcker (Contact Author)

Stanford University - Graduate School of Business ( email )

Graduate School of Business
518 Memorial Way
Stanford, CA 94305-5015
United States
650-725-6159 (Phone)

Stephen Miles

The Miles Group (TMG) ( email )

630 Fifth Avenue Suite 3210
New York, NY 10111

HOME PAGE: http://miles-group.com/

Brian Tayan

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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