I’ve received a number of calls telling me, politely and otherwise, that I didn’t know what I was talking about in the final sentence of Retention? Not at the top; that, in fact, it is CEO performance alone, not Wall Street, that impacts tenure.
It’s hard to do anything other than argue beliefs without stats and studies to back one up, and neither side had them.
Aha! Now I do.
“Analyst’s Report: You’re Fired
Wall Street analysts are crunching careers as well as numbers. If half of those covering a company downgrade its stock–say, from “buy” to “hold”–the odds increase nearly 50% that the CEO will be spending more time with the family within six months. And if just one analyst drops coverage of a company, the chance that its chief will be gone within a year goes up almost 40%.
That finding comes from research conducted recently by Margarethe Wiersema, a management professor at the Jesse H. Jones Graduate School of Management at Rice University, and Mark Washburn of the University of California at Irvine, who studied Fortune 500 companies from 1996 to 2000. The “analyst effect,” they say, went beyond the impact of bad performance: The study controlled for the effects of dropping revenues and profits.
The results may resonate with those concerned about the high CEO turnover these days. (So far this year, 1,112 chiefs have left their posts.) “Our findings suggest that boards are not focused enough on fundamentals and too focused on Wall Street,” Wiersema says.”
By Nanette Byrnes, Business Week, 11.13.06
I, for one, am not surprised, and I’m sure many of you aren’t, either.