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Are CEOs of public companies getting fired too fast?

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VANCOUVER (NEWS 1130) – Some new research out of UBC finds chief executives of public firms are being turfed too quickly, because too much focus is being put on short-term results.

Kai Li with the Sauder School of Business says public companies have a lot of investors who only look at short-term performance.

She says CEOs know that, and so they may not spend much time on long-term projects which overall, can hurt the economy.

“So that means the firms wouldn’t have a long-term orientation, long-term strategies,” she explains. “You only invest in short-term, immediate projects that can have the performance outcomes, but you lose the ability to compete, long-term.”

Li and her colleagues looked at nearly 3,000 cases of CEO turnover at public and private firms in the U.S. between 2001 and 2008.

They found CEOs at private firms lasted longer.

Li says shareholders and board members don’t have the time or expertise to look at a CEO’s performance in-depth, so instead look at easy, short-term measurements.

She found the most short-sighted investors fired their CEOs the fastest, and their companies saw the least improvement in performance after new CEOs were brought in.

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