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Tough at the Top

The turn of events at GE highlights the tenuous role of the CEO. John Flannery, the recently deposed CEO of GE, spent 25 years working his way through the ranks within striking distance of the top job. Then he was engaged in a four-year bakeoff against four rivals in a succession process led by the Board that landed him the top job. Alas, Flannery had a meager fourteen month stint that ended in his dismissal after missing financial targets and the pace of change. The real issues was that GE shares tumbled by half during his tenure, and it probably was not his fault. Enter GE’s next CEO, Larry Culp who took the baton with the stock at $13.00 and it closed yesterday at $8.42, not a good sign for Culp. According to the research firm Equilar, Inc. the median tenure for CEOs is five years for American large-cap companies, and declining. The bottom line is that Boards are increasingly quick to make a change which is an extension of the quarter-to-quarter stress test that the CEO has to navigate. It’s tough at the top.

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