CEOs Tend to Stay in Power Too Long, Hurting Firm Performance

http://www.sciencedaily.com/releases/2013/12/131216183650.htm

Dec. 16, 2013 — The longer CEOs stay in power -- and a new study suggests most of them do, exceeding the optimal tenure length by about three years -- the more likely chief executives are to limit outside sources of market and customer information, ultimately hurting firm performance.

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According to the study, the average CEO holds office for 7.6 years, but the optimal tenure length is 4.8 years.

"As CEOs accumulate knowledge and become entrenched, they rely more on their internal networks -- employees -- for information, growing less attuned to market conditions and customers," Luo said. "And because these longer-tenured CEOs have more invested in the firm, they favor avoiding losses over pursuing gains. Their attachment to the status quo makes them less responsive to vacillating consumer preferences."

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