Magazine article European Business Forum

In My Opinion

Magazine article European Business Forum

In My Opinion

Article excerpt

Margarethe Wiersema reports on a recent study of CEO successions in large US companies which shows that the practice of CEO dismissals has increased dramatically and that over 70 per cent of all CEO successions are not voluntary. This practice is much less common in Europe than in the US as a result of the difference in Corporate Governance between the two continents. The shares of American corporations are much more widely held than in Europe and therefore these corporations are more immediately subject to pressure from institutional investors. In Europe, by contrast, high percentages of companies are still family-controlled, particularly in France, Germany and Italy.

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She then goes on to describe the effects of CEO replacements, demonstrating that this is no panacea for poor company performance. This may not be the most welcome news for the Executive Search profession but it appears intuitively sensible that in most cases market forces may matter more than a new CEO, and that even a very qualified candidate will have trouble justifying the high expectations that accompany his arrival. The decline of a corporation does not happen overnight and, generally, it can be assumed that sensible people have tried most of the obvious things to move the company back in the right direction. In order to reposition a company in highly competitive markets, even a new CEO has to "drill small holes into very thick boards" to use the German expression.

Wiersema describes the failure of most corporate boards to address critical developments at an early stage. …

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