- In today’s CEO Daily: Geoff Colvin examines the rise of outsider CEOs.
- The big story: Warner Bros. Discovery prepares to reject Paramount’s bid.
- The markets: Up globally.
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Good morning. 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. Through September, 33% of the new CEOs in the S&P 500 this year were outsiders, a striking increase from 18% last year, according to the Conference Board. Insider CEOs often seem like the obvious choice, but Jim Citrin, who leads the CEO practice and co-leads the board practice at the Spencer Stuart advisory firm, tells me that research supports boards taking a chance on an outsider—in this or any other business climate.
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.” Spencer Stuart research of 950 CEOs at S&P 500 companies shows that 34% of insiders are classified as overperformers while 33% of outsiders are. 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.” Specifically, Spencer Stuart research has found that when a CEO ran two successive companies, 70% of them performed better on the first. The one exception, Citrin says, is “when it’s a clear turnaround and you have someone who is credible in that market and ideally has a playbook.” Think of Lip-Bu Tan at
Intel.
One of directors’ most strongly held views is that insider CEOs bring more stability. It seems so obvious. Citrin says the data isn’t in yet, but he’s skeptical. An insider CEO will typically have been one of two or three candidates, and those who didn’t get the job typically leave, he says. Plus, an insider knows where the bodies are buried and wants to build their own team. So it could be that, on average, insiders “make more change in the C-suite than someone coming in from the outside.”
Citrin says he tells directors about all these findings, but “that doesn’t mean you should do anything. All it means is—and I say this to boards all the time—just be a little more open-minded to what is right for your context at this moment.”
Contact CEO Daily via Diane Brady at diane.brady@fortune.com
