CEOs hired from outside a firm are more likely to be dismissed

A new study in Strategic Management Journal reveals that Boards of Directors commonly make mistakes in CEO appointments when they hire CEOs from outside the firm. The Board knows less than the external CEO candidates regarding their true competencies, and as a result Boards often make faulty hires when they seek new leadership outside the firm. Boards can help avoid the problem of short-tenured external appointments -- although not eliminate it -- if they create nominating committees with leadership by outside directors, who tend to have broader perspectives on the skills of potential candidates.