External CEO Candidates Cost More

CEOs who are hired externally cost significantly more than those hired from within a company, according to FinancialWeek.

CEOs hired externally earned significantly higher salaries than those with at least two years of tenure as CEO, according to an Equilar report. At smaller firms, CEOs received a median pay package that was nearly 80 percent higher than that of tenured CEOs. Larger companies paid external hires about 51 percent, and mid-sized companies paid 10 percent more.

However, CEOs hired internally received median pay worth 22.5 percent less than CEOs with at least two years’ tenure. Likewise, at smaller firms, internally hired CEOs earned almost 20 percent less and 14 percent less at larger companies, according to the FW.

Usually, an externally hired CEO is stepping into a troubled company situation. The survey reviewed data from 1,295 companies in the S&P 1500. It also showed that the COO was the position most likely to advance to chief executive followed by CFO.