Insiders are beating outsiders in the race to become CEO

Good morning.

The job of CEO has gotten harder in recent years, thanks to accelerating technological change, proliferating stakeholder demands, and a world awash in volatility and uncertainty. And as the job has gotten harder, so has the task of finding CEO successors. I spent some time Friday with two masters of CEO succession, Spencer Stuart’s Jim Citrin and Heidrick & Struggles’ Bonnie Gwin. Their insights:

—Inside candidates for CEOs increasingly trump outsiders. Among new CEOs in the COVID era, 78% were internal, according to Gwin.

—COO remains the most popular route to the CEO job, but there was an uptick in CFOs chosen last year (16%), says Citrin. 

—And for the first time, none of the new CEOs in the S&P 500 last year were given the title of chair at the outset, says Citrin. Gwin notes in the Fortune 500 today, only 37% of CEOs also hold the chair title.

Here’s the data that most shocked the CEOs in the audience: Citrin said that while the average tenure of CEOs is about eight years, peak performance occurs in the 11th to 15th year, as measured by total shareholder return relative to the market. “If you can hang on for that long, which only about 20% of CEOs do, that’s where the outperformance happens.”

A few more takeaways:

On boomerang CEOs: “There have been only 22 S&P 500 boomerang CEOs, like Bob Iger coming back to Disney or Howard Schultz coming back into Starbucks, appointed since 2010 (nine of which were interim placements.) A.G. Lafley famously did the same at P&G…But it’s a very small minority (only 3%), and they tend not to do as well in their second term as they did in their first.”


On co-CEOs: “It has worked well in a few situations, but it’s pretty tough. Because what are the guardrails? What does one do versus the other?”


On CEOs who are chosen from the company’s board. “About 6% of CEOs come from the board, and that’s been consistent over the last 20 years. They tend to perform best—slightly better than insiders or outsiders.”


More news below. And read how Sam Altman says he broke all the rules of good startups in developing ChatGPT.

Alan Murray


‘No good options’

U.S. Treasury Secretary Janet Yellen said on Sunday that there were “no good options” if Congress fails to raise the debt limit, which the U.S. could breach as early as June 1. The deadlock between House Republicans and the Biden administration is leading some economists to call for unorthodox alternatives to avoid economic chaos. ABC News 

Open-source no more

The Wall Street Journal reports that China’s decision earlier this year to close off foreign access to public data was caused by U.S. think tank reports on sensitive Chinese policies. Beijing is trying to clamp down on external investigations of its economy, going as far as to raid the China offices of Bain & Co. and the Mintz Group

Berkshire Hathaway

Warren Buffett’s conglomerate Berkshire Hathaway reported a 12.6% year-on-year jump in earnings on Saturday, as the company’s insurance empire recovers from a slump. Shareholders flocked to Berkshire Hathaway’s annual meeting in Omaha, where Buffett and longtime business partner Charlie Munger opined on the EV boom, the banking crisis, and U.S.-China relations. CNBC


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‘Quiet quitting’ the U.S. housing market: One group of sellers has disappeared by Lance Lambert

OpenAI CEO Sam Altman says the remote work ‘experiment’ was a mistake—and ‘it’s over’ by Steve Mollman

Bluesky says no ‘heads of state’ allowed on its Twitter-like platform for now by Kylie Robison 

These are the 4 jobs that are set to disappear in a decade, and the ones that will take over by Jane Thier 

This edition of CEO Daily was curated by Nicholas Gordon. 

This is the web version of CEO Daily, a newsletter of must-read insights from Fortune CEO Alan Murray. Sign up to get it delivered free to your inbox.

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