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Market-Based Solutions to Vital Economic Issues


Kenan Institute 2024 Grand Challenge: Business Resilience
Market-Based Solutions to Vital Economic Issues
Dec 17, 2021

How Long Should a Founder Remain CEO?


Do founder-CEOs have an expiration date? In the wake of Jack Dorsey’s resignation from Twitter, some have begun asking whether the move could herald a new era, in which founders voluntarily step aside rather than sticking around for decades or waiting to be ousted. To explore the value added by a founder-CEO, the authors analyzed stock price and financial performance data from more than 2,000 publicly traded companies. They found that on average, founder-led firms outperform those with non-founder-CEOs — but that the difference dwindles to zero just three years post-IPO, after which founder-CEOs actually start detracting from firm value. Given these findings, they offer three strategies to help investors, boards, and executive teams support founders in transitioning out of the CEO role when the time is right, and ultimately argue that Dorsey’s decision may have been more prescient than many realized.

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