"Big companies announcing new CEOs lately are mostly choosing insiders. Think of Walmart's John Furner, Target's Michael Fiddelke, and Geico's Nancy Pierce. But 2025 has actually been a big year for outsider CEOs. With AI roaring ahead plus unprecedented tariffs, historic geopolitics, and rampaging activist investors, boards of directors naturally want someone who can change a company's direction, and often an outsider, untethered to the company's past, seems like the right choice."
"When it's time to replace the CEO, boards tend to choose insiders, on the assumption that they outperform outsiders. "That's an absolute belief," Citrin says, based on 25 years of counselling boards on successions. But "it's not true. The data shows that insiders and outsiders perform virtually the same on an average basis of total shareholder return relative to the market.""
"The difference is the volatility of performance. With outsiders "there's more upside, but there's more downside," Citrin says, meaning the good performers tend to be really good and the poor performers tend to be really poor. A related belief held by most of the thousands of directors Citrin has counselled is that seasoned CEOs perform better than neophyte CEOs. Wrong again-it's just the opposite: "The data is incredibly strong that first-time CEOs outperform experienced CEOs.""
Boards appointed insiders at many large companies, but outsider CEO appointments rose sharply in 2025, reaching 33% through September versus 18% last year. Factors driving outsider selection include rapid AI adoption, unprecedented tariffs, geopolitical shifts, and activist investors seeking change. Research of 950 S&P 500 CEOs shows similar average total shareholder return for insiders and outsiders, with 34% of insiders and 33% of outsiders classified as overperformers. Outsiders exhibit greater performance volatility, producing higher upside and deeper downside. Data also indicates first-time CEOs outperform experienced CEOs, challenging beliefs favoring seasoned executives in succession decisions.
Read at Fortune
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