Corporate governance decisions, like CEO dismissal, can disrupt organizations. As a result, the board of directors treads with caution while making such decisions. Previous research suggests that boards rely on factors like financial performance and security analyst recommendations to decide on CEO dismissal. A new study published in the Strategic Management Journal in October suggests that employees’ opinions of a CEO are also likely to influence the board’s decision on CEO dismissal.
Corporate governance decisions, like CEO dismissal, can disrupt organizations. As a result, the board of directors treads with caution while making such decisions. Previous research suggests that boards rely on factors like financial performance and security analyst recommendations to decide on CEO dismissal. A new study published in the Strategic Management Journal in October suggests that employees’ opinions of a CEO are also likely to influence the board’s decision on CEO dismissal.
“Using financial performance and security analyst recommendations as assessment criteria for a CEO’s leadership has limitations,” says Danni Wang, one of the study’s authors who serves as an assistant professor of management and global business at Rutgers University. “Firm performance does not fully reflect a CEO’s leadership as it can be influenced by factors beyond the CEO’s control, and security analyst recommendations may be biased or based on an external perspective.
