The 2007 study examined whether the stock market’s demands for short-term gains were driving boards to give chief executive officers too little time to develop and implement long-term strategies that could drive sustained performance. The short answer is “No.” To be sure, since 2000,corporate boards have indeed become somewhat more likely to dismiss their chief executives than in the previous decade. But there is no evidence that those boards are moving hastily to fire CEOs because of poor short-term results. In fact, we find that even the worst-performing CEOs face a low probability of being forced from office in the short term: those in the bottom decile, whose companies’ two-year stock price had fallen by 25 percent in absolute terms and whose companies had under¬performed their regional industry peers by 45 percent had only a 5.7 percent probability of termination.
This study also found that the overall rate of CEO turnover — which includes planned successions, dismissals, and merger-related departures — was 13.8 percent in 2007, compared with 14.4 percent the year before. The rate of forced successions, 4.2 percent, was stable compared with earlier years.