Pyrrhic victories: the cost to the board of ousting the CEO

✍ Scribed by Andrew Ward; Karen Bishop; Jeffrey A. Sonnenfeld

• Publisher: John Wiley and Sons
• Year: 1999
• Tongue: English
• Weight: 139 KB
• Volume: 20
• Category: Article
• ISSN: 0894-3796
• DOI: 10.1002/(sici)1099-1379(199909)20:5<767::aid-job20>3.0.co;2-p

✦ Synopsis

Going against anecdotal evidence and common perception, the ®ndings presented here show that boards who take action against their CEOs do so only at great cost to themselves, winning only a pyrrhic victory. Indeed, the ®ndings presented show three distinct levels of board turnover. Normal attrition in periods of continuity produced a turnover of 10.99 per cent over two years; routine retirement exists (22.35 per cent) produced a similar turnover level to forced exits which did not imply a failure of the board to perform its monitoring function (25.36 per cent). However, forced CEO exits which implied a failure in the board's monitoring and advising roles caused a dramatically higher level of subsequent board turnover (40.55 per cent). These ®ndings demonstrate that is not only the CEO that is forced to sacri®ce his or her job when a company is in distress, but that the board is also accountable for its failure to perform its monitoring and advising duties adequately.