24176254. Privileged PErformance

24176254. Privileged PErformance - Last year, a London...

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According to a recent study in the American Economic Review , firms that appoint a ceo who is related to either the departing ceo, a founder, or a major shareholder significantly underperform when compared to companies that bring new blood into the corner office. Hiring the new boss based on the family tree translates into a 14 percent decline in profits within the first three years. And if the heir apparent didn’t attend a selective U.S. university, profits sink a whopping 25 percent.
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Unformatted text preview: Last year, a London School of Economics/ McKinsey study found similar performance lags in firms run by second generations in Britain, France, and Germany. The combination of a small selection pool, along with the lack of motivation by family members who are guaranteed jobs, predictably leads to less successful businesses. Foreign Policy ; Mar/Apr2007, Issue 159, p24-24...
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This note was uploaded on 02/11/2012 for the course BUSINESS 495 taught by Professor Isaacs during the Spring '11 term at Berea.

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