How the Mighty Are Fallen

Companies statistically dismiss twice as many CEOs in bad economic times as in good. Certainly, many senior executives have lost their jobs lately. Yet this new wave of dismissals masks a deeper trend: In the past two decades, the average tenure of a CEO has halved, and yet, in fewer than half the cases, the reason for their departure was solely because of poor performance. Experts disagree on the reasons for CEO failure, but the variables can be grouped into two broad categories: endogenous variables are those a CEO can influence, such as competencies, compensation policy and stock ownership; exogenous variables are those that CEOs cannot control, including the characteristics of the board that will judge their performance, the sector in which the company operates and the presence of a strong successor. Though nobody knows for sure exactly what causes CEO failure, knowing which factors potentially contribute the most to failure will make CEOs better equipped to succeed.