Power and Managerial Dismissal: Scapegoating at the Top
Boeker, Warren, Administrative Science Quarterly
Boeker, Warren, and Jerry Goodstein 1993 "Performance and successor choice: The moderating effects of governance and ownership." Academy of Management Journal, vol. 36 (in press).
Brady, Gene F., and Donald L. Helmich 1984 Executive Succession. Englewood Cliffs, NJ: Prentice-Hall.
Dalton, Dan, and Idalene Kesner 1985 "Organizational performance as an antecedent of inside/outside chief executive succession: An empirical Who controls the process of chief executive succession? Sociologists, political scientists, and organization theorists have been interested in studying executive succession precisely because the succession event can offer a fairly public indication of the underlying power structure of the organization (Pfeffer, 1981). How the succession event occurs and who is appointed as the successor can influence both the subsequent direction of the organization and how organizational resources will be allocated in the future (Allen, 1981). As Zald (1965: 53) observed, "at the very least the choosing of a successor has to reflect the power balance of the organization."
Not all succession events are equally interesting to theorists, however. Executive successions that are the result of voluntary departure or a mandatory retirement policy are fairly easy to understand and explain (Fredrickson, Hambrick, and Baumrin, 1988). Zald (1965) noted that the succession events of greatest theoretical interest involve the dismissal of the chief executive, since it is in this case that power and influence are more likely to be exercised. Unfortunately, most past research has examined executive succession as a general phenomenon and has not differentiated between executive dismissals and other forms of departure that may be voluntary (Fredrickson, Hambrick, and Baumrin, 1988; Puffer and Weintrop, 1991).
Top management dismissals are a unique form of involuntary turnover whose causes likely differ from those of voluntary separations such as retirements (Friedman and Singh, 1989). As Fredrickson, Hambrick, and Baumrin (1988) noted, the effects of dismissal can be disruptive, renewing, or of no consequence, but an understanding of the effects of dismissal must begin with an understanding of its causes. The primary objective of this study is to investigate the phenomenon of management dismissal and the role of power and influence in the dismissal process by examining the influence that chief executives, owners, and the board of directors have over the dismissal process, especially when the firm is performing poorly.
Chief executive dismissal is more likely when organizational performance is poor and the power of the chief executive is low. Chief executive power is a function of the composition and loyalty of the board of directors and the ownership configuration of the organization. As Friedman and Singh (1989: 724) noted, "Conditions conducive to chief executive dismissal include the presence of a large number of strong outsiders on a board and a significant concentration of stock ownership in the hands of institutions or groups other than management. Under those conditions a chief executive's power vis-a-vis a board is low, increasing the likelihood of board-initiated succession." In the following sections I develop theoretical arguments for the direct and interactive effects of firm performance, ownership, and board composition on the likelihood of chief executive and top management dismissals.
The Role of Performance in Dismissal
One relatively consistent finding from past empirical research on executive succession has been the critical role played by organizational performance (Tushman, Virany, and Romanelli, 1989). Not surprisingly, chief executives of organizations that perform well appear to enjoy longer tenures and less likelihood of dismissal than do chief executives of poorly performing organizations (Lieberson and O'Connor. 1972; Helmich, 1977). McEachern (1975) examined succession in large industrial firms and found that chief executives were more likely to change when the firms' profits declined four or more years in a row. …