The Process of CEO Dismissal: An Exploratory study

Abstract

The decision to change the CEO is one of the most important decisions of the Board of Directors in a company. This study increases understanding of the process that leads to a Board’s decision to dismiss the CEO under conditions of poor performance, and of the meaning of attributions in CEO dismissal. The role of the Chair of the Board in this process is also explored. An exploratory, empirical study concerning nine CEO dismissal processes is conducted based on open-ended interviews with seven Chairpersons of the Board. The findings shed light on the issues that impact the relationship between poor company performance and CEO dismissal. In particular, the results increase understanding of the influential role of the Chair in the governance context of CEO non-duality, i.e., separated roles of CEO and Chair. It is proposed that social forces and changing dynamics in the social relationships between the Chair, the CEO and other Board Directors are likely to have an impact on the Board’s attribution process and CEO dismissal.