Top director shake-up: The link betwen Chairman and CEO dismissal

TY - JOUR

T1 - Top director shake-up

T2 - The link betwen Chairman and CEO dismissal

AU - Florou, Annita

PY - 2005/1

Y1 - 2005/1

N2 - Most UK companies separate the roles of CEO and Chairman. The former runs the company and the latter runs the board. Using turnover data on 2,180 separate Chairmanships of the top 460 UK firms over the 1990–1998 period, I find that the Chairman is more likely to be replaced when the CEO is dismissed. Detailed data on the dismissal events suggests that Chairman replacement is associated with board restructuring. This may be necessary to bring in different skills and experience which, in turn, might facilitate changes in future corporate decisions. Moreover, I find that the Chairman's previous position, or the type of Chairmanship, does not affect the association between Chairman removal and CEO dismissal. But, the increase in the dismissal likelihood of the Chairman at the time of forced CEO departure is higher when she is involved in the appointment of the failing CEO. This, in turn, can be interpreted as an indication of effective governance.

AB - Most UK companies separate the roles of CEO and Chairman. The former runs the company and the latter runs the board. Using turnover data on 2,180 separate Chairmanships of the top 460 UK firms over the 1990–1998 period, I find that the Chairman is more likely to be replaced when the CEO is dismissed. Detailed data on the dismissal events suggests that Chairman replacement is associated with board restructuring. This may be necessary to bring in different skills and experience which, in turn, might facilitate changes in future corporate decisions. Moreover, I find that the Chairman's previous position, or the type of Chairmanship, does not affect the association between Chairman removal and CEO dismissal. But, the increase in the dismissal likelihood of the Chairman at the time of forced CEO departure is higher when she is involved in the appointment of the failing CEO. This, in turn, can be interpreted as an indication of effective governance.

U2 - 10.1111/j.0306-686X.2005.00589.x

DO - 10.1111/j.0306-686X.2005.00589.x

M3 - Article

VL - 32

SP - 97

EP - 128

JO - Journal of Business Finance & Accounting

JF - Journal of Business Finance & Accounting

IS - 1-2

ER -