Study: Foreign-born CEOs are more likely to be fired than native-born CEOs

Foreign-born chief executive officers (CEOs) are increasingly common in US C-suites and currently manage several global firms, including Satya Nadella at Microsoft, Sundar Pichai at Alphabet Inc. and its subsidiary Google, Vasant Narasimhan at Novartis, Shantanu Narayen at Adobe, Arvind Krishna at IBM, Laxman Narasimhan at Starbucks, Reshma Kewalramani at Vertex Pharmaceuticals, Sanjay Mehrotra at Micron Technology, Anirudh Devgan at Cadence, and Nikesh Arora at Palo Alto Networks. According to recent data, 12% of Fortune 500 CEOs were born abroad. But, once hired, are foreign- and native-born CEOs evaluated uniformly by corporate boards?

A recent study by Yannick Thams, Ph.D., an associate professor in FAU’s College of Business, and Marketa Rickley, Ph.D., with the University of North Carolina at Greensboro, found that foreign-born chief executive officers (CEOs) are more likely to be fired than their native-born counterparts if the company they are leading is underperforming. The study analyzed the dismissal rates of 1,500 companies over an 18-year period, comparing foreign-born CEOs to native-born CEOs during times of poor company performance.

Upon reviewing nearly 12,000 data points spanning from 2000 to 2018 within the S&P 1500, a team of researchers discovered that American-born CEOs had a 4.02% likelihood of termination if their company was not performing well during their tenure. In contrast, foreign-born CEOs had a 15.96% chance of being let go under identical circumstances.

Foreign-born chief executive officers (CEOs), defined as “CEOs born outside the country of the firms they lead.” CEO dismissal is defined as “a situation in which the CEO’s departure is ad-hoc (e.g., not part of mandatory retirement policy) and against his or her will.”

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