Sometime last year, James Joseph Minder, chairman of gun manufacturer Smith & Wesson, stepped down from office. The reason: a newspaper expos? revealed that Minder was actually far more familiar with the company?s products than revealed earlier. Unknown to Smith & Wesson, where he had taken over just a while back, Minder had earlier spent 10 years in prison for a string of armed robberies (his favourite weapon was the proverbial 16-gauge, sawed-off shotgun).

That?s a rather extreme example. In these days of fishbowl living, not too many people can get away with such secrets. So hiring a CEO from outside is not as dangerous as it may seem. There are other dangers, however. And, in an era where CEOs are being given the pink slip with greater frequency, these need to be noted. The insider vs outsider debate has never been as strong ? or necessary ? as it is today.

Take a look at some data first. In the US in the Seventies, the number of external candidates to make it to the corner office was 15 per cent. This increased to 26 per cent in the Nineties. It is even higher today. In India, there are companies like Zee, where the CEO?s office could well have been equipped with a revolving door, the CEO changes so frequently. At Britannia, Sunil Alagh was given the heave ho. Insider Nikhil Sen, who had been with the company for more than 25 years, ran the show for a year though he was not formally designated CEO. Then Vinita Bali was brought in as CEO and Sen quit 10 days later.

Changes where outsiders are brought in are particularly in vogue in the subsidiaries of hitech MNCs. Over the past few years, IBM India has seen a new CEO (Shankar Annaswamy from GE Medical Systems). There have also been changes at the top at Microsoft (Ravi Venkatesan from Cummins), Cisco (Rangnath Salgame from Edgix)... the list goes on.

?These were all people brought in from outside to stir up organisations that some felt were becoming laidback,? says a corporate analyst.

A CEO from outside should be preferred when the organisation is in trouble. This is not because of the new-broom principle. Rather, if the current CEO has had to step down because he has failed, handing the baton to one of his deputies (likely to be his handpicked man or woman) is rather farcical. ?Firms tend to promote new CEOs from within, but not always,? says Anup Agarwal of the University of Alabama, who has conducted a study titled ?Are outsiders handicapped in CEO succession?? His conclusion: yes, they are.

Another study by Harvard professor Rajesh Khurana says that succession planning is a very haphazard affair. More importantly, hiring a CEO who the world thinks will deliver is normally an unplanned and disastrous exercise.

There are various pros and cons for insiders and outsiders. Here?s one view from the Burson-Marsteller/RHR International?s Building CEO Capital study: ?Business influencers believe that companies are better off hiring insider CEOs than outsider CEOs for long-term business success (47 per cent versus 33 per cent).? The numbers are close: This is one debate that can have no easy solutions.