The 2003 study examined the effects of the global economy emerging from the financial storms of 2000 – 2002. It suggested that the hunting season for chief executives was winding down. In 2003, only 9.5 percent of the world’s 2,500 largest public companies changed chief executives, the first time since 1998 that CEO turnover was under 10 percent. The primary reason for the decrease was a striking decline in the number of CEOs who were fired because of poor performance.
The study also found that compared to 1995, companies remained focused on firing underperforming chiefs — the rate of CEO dismissals increased by 170 percent from 1995 to 2003. Yet that appeared to be contributing to lower average shareholder returns. Why? Among other reasons, companies were dumping CEOs faster than they could replace them with qualified internal candidates, and thus were turning increasingly to outsiders. But our data shows that outsiders deliver significantly lower shareholder returns than insiders do over the course of their tenure.