MGST 451 QUIZ 2_76 QUESTIONS WITH
VERIFIED ANSWERS
approximately 17% per year on a global basis trending higher each year
It is generally inversely proportional to performance (ex. CEO's underperform
likely terminated)
still, some are unlikely to be terminated no matter how poorly they perform
However CEO turnover is not very sensitive to performance (termination rates are
not much higher in underperforming CEOs than in overperforming)
Top company TR = .08%
Bottom company TR = 2.7% - CORRECT ANSWER CEO turnover
Strong governance are more likely to terminate an underperforming CEO
- Boards that are not "busy"
- Boards with high percentage of outside directors
- Directors own large percent of share
- Shareholder base concentrated among handful of institutions
Shareholders react positively to underperforming CEO termination being replaced
with outsider
,*This is consistent with a theory that independent oversight reduces agency costs
and management entrenchment - CORRECT ANSWER CEO turnover with strong
governance companies
Average CEO tenure in 2000-2004 dropped from 9.5 to 8.5 in 2010-2014
Kaplan and Minton (2011) show that turnover of CEO's has increased from 15.8%
to 16.8 since 2000, average tenure down from 7 to 6 years
"Celebrity" CEO failures is also getting longer, proving that no one is immune. The
last research from "Hogan & Kaiser,2011) confirms failure rate of all executives is
nearly 50% - CORRECT ANSWER CEO tenure & failure
Process for identifying, recruiting, training, and mentoring high-performing
employees with leadership potential, preparing them to step into the senior most
and/or C-suite positions when vacancies occur - CORRECT ANSWER Succession
Large companies:
- Lost opportunities: an estimated US$112 Billion more in market value in the year
before and the year after their turnover if their CEO succession had been the
result of planning
Even with planning both year before and after suffer financial performance loss
Always cost to changing leadership at the top, but companies pay a bigger price
when get into situations that can be resolved only by forcing out their CEO -
CORRECT ANSWER Cost of succession failure
,CEO failure seems widespread with roughly 35% of CEO turnover being forced
Anecdotal estimate suggest 30% of C-suite succession decisions end up mistakes
Cost of mistakes are 1.8 billion in market value - CORRECT ANSWER C-suite
succession failure
- Pace of tech developments
- Rapid change makes long range planning difficult
- Global competitive marketplace
- Overwhelming information provided through internet
- Leading and managing the needs of divers workforce
- Meeting expectations of shareholders/embers - CORRECT ANSWER Factors
making CEO jobs tougher
Supply Side
- Candidate characteristics
Demand Side
- Decision makers' biases - CORRECT ANSWER Two main points causing CEOs to fail
Successful CEOs
- humble, feedback seeking, unselfish
, Failed CEOs
- Arrogant, Fail to listen, Selfish - CORRECT ANSWER Supply Side
In-group bias
- Preferential treatment to one's group
Bandwagon Effect
- Doing what is popular
Confirmation Bias
- Seek confirmation
Escalation of Commitment
- Precedence/Sunk costs
Over confidence - CORRECT ANSWER Demand Side
No
- Hard to evaluate executive skills
- It is difficult to predict if a candidate will succeed
- The size of the market is very limited
VERIFIED ANSWERS
approximately 17% per year on a global basis trending higher each year
It is generally inversely proportional to performance (ex. CEO's underperform
likely terminated)
still, some are unlikely to be terminated no matter how poorly they perform
However CEO turnover is not very sensitive to performance (termination rates are
not much higher in underperforming CEOs than in overperforming)
Top company TR = .08%
Bottom company TR = 2.7% - CORRECT ANSWER CEO turnover
Strong governance are more likely to terminate an underperforming CEO
- Boards that are not "busy"
- Boards with high percentage of outside directors
- Directors own large percent of share
- Shareholder base concentrated among handful of institutions
Shareholders react positively to underperforming CEO termination being replaced
with outsider
,*This is consistent with a theory that independent oversight reduces agency costs
and management entrenchment - CORRECT ANSWER CEO turnover with strong
governance companies
Average CEO tenure in 2000-2004 dropped from 9.5 to 8.5 in 2010-2014
Kaplan and Minton (2011) show that turnover of CEO's has increased from 15.8%
to 16.8 since 2000, average tenure down from 7 to 6 years
"Celebrity" CEO failures is also getting longer, proving that no one is immune. The
last research from "Hogan & Kaiser,2011) confirms failure rate of all executives is
nearly 50% - CORRECT ANSWER CEO tenure & failure
Process for identifying, recruiting, training, and mentoring high-performing
employees with leadership potential, preparing them to step into the senior most
and/or C-suite positions when vacancies occur - CORRECT ANSWER Succession
Large companies:
- Lost opportunities: an estimated US$112 Billion more in market value in the year
before and the year after their turnover if their CEO succession had been the
result of planning
Even with planning both year before and after suffer financial performance loss
Always cost to changing leadership at the top, but companies pay a bigger price
when get into situations that can be resolved only by forcing out their CEO -
CORRECT ANSWER Cost of succession failure
,CEO failure seems widespread with roughly 35% of CEO turnover being forced
Anecdotal estimate suggest 30% of C-suite succession decisions end up mistakes
Cost of mistakes are 1.8 billion in market value - CORRECT ANSWER C-suite
succession failure
- Pace of tech developments
- Rapid change makes long range planning difficult
- Global competitive marketplace
- Overwhelming information provided through internet
- Leading and managing the needs of divers workforce
- Meeting expectations of shareholders/embers - CORRECT ANSWER Factors
making CEO jobs tougher
Supply Side
- Candidate characteristics
Demand Side
- Decision makers' biases - CORRECT ANSWER Two main points causing CEOs to fail
Successful CEOs
- humble, feedback seeking, unselfish
, Failed CEOs
- Arrogant, Fail to listen, Selfish - CORRECT ANSWER Supply Side
In-group bias
- Preferential treatment to one's group
Bandwagon Effect
- Doing what is popular
Confirmation Bias
- Seek confirmation
Escalation of Commitment
- Precedence/Sunk costs
Over confidence - CORRECT ANSWER Demand Side
No
- Hard to evaluate executive skills
- It is difficult to predict if a candidate will succeed
- The size of the market is very limited
