Researchers from the University of North Carolina Chapel Hill attempted to quantify when might be the right time for a company founder to step down as CEO, The Harvard Business Review reported Dec. 17. Although the answer varies by company, the researchers offered suggestions on how to smooth the transition.
Some CEOs are publicly ousted after mishaps, begging the questions whether they should've stepped down sooner instead of overstaying their welcome.
New research reveals when the time is right for founder-CEOs to move on. The researchers from The University of North Carolina Chapel Hill collected data from almost 2,000 public companies and analyzed the relationship between founder-CEO leadership and financial performance.
They found that founder-CEO leadership is associated with a 10 percent increase in valuation at IPO but then deteriorates. Around three years after a company goes public, the value added by the founder-CEO dwindles to zero. After then, they start detracting from the company value.
However, there are notable outliers in Jeff Bezos of Amazon and Len Schleifer of Regeneron Pharmaceuticals. Both remained in the CEO position more than 20 years after their companies' respective IPOs, and both firms' valuations exceeded $50 billion under their leadership. Bezos stepped down as Amazon's CEO in July.
The researchers suggest that founders should consider taking non-CEO positions at their companies and lead succession planning discussions.