Booz Allen Hamilton: Half of all Chief Executives are dismissed from office, but those who can deliver results are in greater demand than ever (page 2 of 2)

It represents a remarkable change for companies. The position of CEO was seen as a steward for a company. The position was a reward for years of hard work, and the person who earned the position was meant to stay on and steer the company through both the good and the bad. The CEO would only leave when he reached his retirement. And even then he might stay on board in some capacity, usually as chairman. This is no longer the case.

Instead a CEO is very likely to be removed from his position if the company does not perform well during his or her tenure. There's a catch however; sometimes the CEO isn't given a long enough chance to right the ailing ship.

The authors of the study concluded from the data that there are several things a corporation can do in order to avoid problems related to CEO performance:

• If you hire an insider CEO, performance will be poor for the first five years, but will become good over the longer term. Because of this, you should not hastily fire an insider CEO.

• As stated above, do not make the former CEO chairman of the company. A new CEO will not be able to function well under the chairman and will struggle for autonomy.

• If you bring in an active CEO from another company, your company's performance may or may not do well. There isn't enough data yet to see whether this strategy works.

• If you bring in an old former CEO from another company, you will initially have strong performance, but it will later deteriorate. Performance will also not be as strong as hiring a first time CEO from outside the company.

• If you bring in a first time CEO from outside the company performance will improve only for the first five years and then deteriorate. The best bet is to have this CEO only for a short while before removing him or her.

"Hiring a CEO from outside the company, with or without experience should only be seen as a stop-gap," continued Kocourek. "During this period the company should be grooming this person's replacement from within the company itself."

The survey's authors offer some hope for beleaguered CEOs: While it is harder than ever to avoid dismissal in your job, it probably isn't getting any worse. The numbers are already starting to plateau. The bad news is that they certainly aren't getting any better.

What does the future hold? According to the study's authors probably more governance regulation on the part of Western governments. With more regulation comes increased scrutiny on CEO behaviour and laws created to give others more power over the CEO.

And that will mean an increasingly active role for the board of directors. Boards are seen as the natural recipient of increased power over a CEO, so when trouble comes, the boards will be forced to react and punish.

Already with growing numbers of CEOs being dismissed, boards have had their hands full finding qualified replacements. But because many laws now mandate that boards be made up of independent outsiders, rather than insider employees, boards will probably enjoy their new powers over the CEO.

"The trend toward more regulation of CEOs will be a good thing in the end," concluded Karim Sabbagh. "While many will complain of short term instability because of high turn over, if the conclusions from this study are realised and utilised by boards of directors throughout the business world, we'll still see a considerable number of dismissals but many of those dismissals will be deserved, and corporate performance will improve."