The Correct Methodology of Selecting CEOs
The Correct Methodology of Selecting CEOs Abstract
Selecting the correct methodology for recruiting your next chief executive officer is undoubtedly one of the most difficult decisions that a board of directors will ever have to make. Horse races, promotion contests, and the extensive use of executive search firms have proven to be the most common forms of selecting company’s top executives. The fight to hold to the title of CEO between internal and external candidates is cut-throat and in most cases, a popularity contest based on reputation alone. Selecting the proper method of recruitment helps companies to eliminate these battles and pick the top candidate based on their qualifications such as their credentials, experience, background, education, and personal references.
Keywords: selecting CEOs, horse race, promotion contest, executive search firm
The Correct Methodology of Selecting CEOs
A chief executive officer is the highest ranking corporate officer of an organization and is responsible for the overall management and success of their company. A CEO is the face of their organization and is generally the person responsible for leading the company, managing the employees, communicating to the public and stakeholders, as well as acting as the primary decision maker for the company. The chief executive officer generally answers to a board of directors which is a group of men and women who are elected by the shareholders of a company to govern the company and oversee all of its major decisions. Each year, 10%-15% of major corporations in the United States change their chief executive officers with the majority of these companies selecting their candidates from an outside organization (Chung, 1987). A change in CEO leadership for a company can be caused for a variety of reasons, but most likely will be due to retirement, transferring to another company, or not meeting performance expectations (Southerland & Mackey-Ross, 2006). In most cases a CEO
Selecting the correct methodology for recruiting your next chief executive officer is undoubtedly one of the most difficult decisions that a board of directors will ever have to make. Horse races, promotion contests, and the extensive use of executive search firms have proven to be the most common forms of selecting company’s top executives. The fight to hold to the title of CEO between internal and external candidates is cut-throat and in most cases, a popularity contest based on reputation alone. Selecting the proper method of recruitment helps companies to eliminate these battles and pick the top candidate based on their qualifications such as their credentials, experience, background, education, and personal references.
Keywords: selecting CEOs, horse race, promotion contest, executive search firm
The Correct Methodology of Selecting CEOs
A chief executive officer is the highest ranking corporate officer of an organization and is responsible for the overall management and success of their company. A CEO is the face of their organization and is generally the person responsible for leading the company, managing the employees, communicating to the public and stakeholders, as well as acting as the primary decision maker for the company. The chief executive officer generally answers to a board of directors which is a group of men and women who are elected by the shareholders of a company to govern the company and oversee all of its major decisions. Each year, 10%-15% of major corporations in the United States change their chief executive officers with the majority of these companies selecting their candidates from an outside organization (Chung, 1987). A change in CEO leadership for a company can be caused for a variety of reasons, but most likely will be due to retirement, transferring to another company, or not meeting performance expectations (Southerland & Mackey-Ross, 2006). In most cases a CEO
References: Citrin, J. (2009). Is a ‘horse race’ the best way to pick CEOs? The Wall Street Journal. Lawrence, A. T. & Weber, J. (2008). Business and society: Stakeholders, ethics, public policy (12th ed.). New York, NY: McGraw-Hill. Southerland, K. & Mackey-Ross, C. (2006). How to recruit your next CEO. Trustee, 59(8), 15-18. Tsoulouhas, T., Knoeber, C., & Agrawal, A. (2007). Contests to become CEO: incentives, selection and handicaps. Economic Theory, 30(2), 195-221. doi: 10.1007/s00199-005-0060-8