TANZANIA: THE issue of chief executive officer (CEO) performance is undoubtedly a hot research topic in the management literature and has been investigated from various perspectives.
One of the contention issues in the country is the CEO’s tenure where the central bank puts a cap of ten years. On this issue, there are two schools of thought one supporting the Bank of Tanzania (BoT) saying the 10-year limit has more benefits than disadvantages and others urging that CEOs need a lengthy period to implement their vision and turnaround corporates. Some studies show that over time, CEOs develop strong experience in how to lead the organisation and how to be successful in a given industry.
Experience may allow a more efficient and effective management approach, even when the environment is changing A study ‘Exploring the Relationship Between CEO Characteristics and Performance’ conducted by three Spanish scholars shows a strong correlation between CEO longer tenure and high financial performance.
“CEO’s tenure in the firm appears to be an important factor,” showed the study findings of Josep Garcia-Blandon, Josep M Argilés-Bosch and Diego Ravenda. The three are from IQS School of Management, Universitat Ramon Llull, Barcelona, Spain; Department of Accounting, Universitat de Barcelona, Barcelona, Spain; and Department of Accounting, Toulouse Business School, Barcelona, Spain respectively. “Specifically, long-tenured CEOs show stronger financial performance, though weaker environmental, social and governance (ESG) performance,” the study showed.
Additionally, the Wall Street Journal also wrote recently an article discussing the correlation between companies with CEOs in a position for longer than 15 years and their stock prices within that same time frame.
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