CEO Selection: The Costs of Getting It Wrong

electing a CEO is arguably one of the most vital decisions a board makes. The costs of selecting the wrong chief executive are immense, and the impact on the enterprise is far-reaching. Companies that choose the wrong leader can suffer hits to their stock price and market capitalization and lose in a variety of areas — momentum, opportunities, reputation, customer goodwill and, perhaps most importantly, trust within the organization, which can take years to re-establish. 
The impact of the CEO — especially one who fails — is staggering:

> The economic cost of appointing the wrong CEO at global companies is estimated at more
than $100 billion.1
> Nearly one-third of investment decisions are related to the reputation of the CEO; 39 percent of investors say they would likely sell a stock based solely on the CEO, while only 15 percent say they are likely to buy a stock based on the CEO’s current reputation alone.2
> A study conducted by Rakesh Khurana, dean of Harvard College, and Nitin Nohria, dean of Harvard Business School, found that CEOs appointed after 1985 were three times more likely to be fired than CEOs who were appointed before that year.
> According to Harvard Business School, 40 percent of all executives who change jobs or get promoted fail in the first 18 months, a number that has remained steady for the past 15 years.

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