In considering CEO candidates, boards of directors and selection committees almost always raise one question: “How will the market react?” It’s an understandable concern. Because the board represents the shareholders, it needs to look at decisions through an investor’s lens. And because the market quickly incorporates new information into the value of a company’s stock, its reaction to the naming of a CEO should presumably be a meaningful barometer of that person’s future performance.
A version of this article appeared in the January–February 2012 issue of Harvard Business Review.