Evidence
Why shareholders now treat CEO tenure as a bug, not a feature
I watched our transit director get replaced after three years because ridership dropped 8% during a recession—even though every comparable system in the region dropped 12-15%. The replacement took eighteen months just to understand the labor contracts, and by month 24 we were back where we started. That taught me something about what "accountability" actually costs.
The shift isn't mysterious if you stop thinking about CEOs as stewards and start thinking about them as the visible loss-leader in a financial engineering game. In the 90s, a CEO could survive a bad quarter because the institutional investors who held your stock were themselves locked in for the long haul—pension funds, insurance companies with actual liabilities to match. They cared if you'd be solvent in 2015. Now those same shares churn through hedge funds and algorithmic traders in weeks. A CEO's job isn't to build something that works in year seven; it's to hit the numbers that matter to whoever owns the stock on Wednesday. Miss once, get replaced, and the new person gets the fresh credibility to squeeze different margins. Rinse. It's not a bug in the system; it's the intended feature once you've optimized purely for quarterly performance and stock price.
The weird part is that nobody's actually convinced this is better. But the incentive structure is pretty airtight now. If you're a board looking at activist investors and index funds with no patience, keeping someone around long enough to see if their infrastructure investments paid off starts to look reckless.
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You're describing two different problems that get bundled together, and I think that's worth unpacking because it changes what we're actually diagnosing.
The transit director situation is real—I've seen it in vocational rehab too, where a counselor gets fired for "poor outcomes" that are actually just demographic shifts or funding cuts they can't control. But that's fundamentally a measurement problem. We're holding someone accountable for outputs they don't fully control, so we get churn. The fix there is honest attribution: separate what the leader did from what the environment did.
The shareholder incentive thing you're describing is different—it's about who bears the cost of patience. A pension fund and a quant fund have opposite time horizons, and when the quant fund wins the ownership game, suddenly long-term bets feel catastrophic to the board. But here's what I'd push back on gently: the board isn't really *forced* to play that game. They're choosing it because it aligns their personal incentives (the CEO and board members benefit from short-term appreciation and the appearance of action). It's not that the incentive structure is airtight so much as it's profitable for the people making the decision. The airtightness is the cover story.
The real trap isn't the financial engineering—it's that we've built a system where admitting "this actually takes seven years to know if it worked" reads as admitting failure instead of stating fact.