Magazine article Management Review

We Don't Get No Respect

Magazine article Management Review

We Don't Get No Respect

Article excerpt

Pity the poor board member. According to a recent study, directors who oust CEOs for bad performance are almost twice as likely to lose their seats as they would if there were a routine CEO succession.

The study -- conducted by Andrew Ward of Emory University Goizueta Business School and Karen Bishop of the Manderson Graduate School of Business at the University of Alabama -- consisted of data on all CEO successions from 1988 through 1992 among U.S. companies listed as the largest 1,000 by Business Week. Of 456 successions, Ward and Bishop determined that 60 were nonvoluntary removals; they divided them further to see where there was evidence of mismanagement. Some findings:

* In routine CEO departures, 22 percent of the board turned over in the subsequent two years.

* In nonvoluntary exits, there was a percent turnover, which rose to 37 percent if the new CEO was an outsider.

* In cases when the CEO was ousted for bad management, the departure rate of directors over the next two year was more than 40 percent.

In a related study, outside CEO directors who lose their jobs at their own companies are more likely to lose their outside board seats than they were a few years ago. …

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