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CEO Longevity

CEO Longevity.

phinupham
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CEO Longevity

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  1. CEO LongevityBy PhinUpham

  2. Factors That Influence CEO Longevity • The author identifies two central factors that influence CEO longevity: • Model of the institutionalization of power • Model of the circulation of power • Two competing frameworks. • Each model has a different way of viewing CEO tenure. • Makes competing or complementary predictions, which he then tests.

  3. Ocasio’s Argument • Depends on the logics of the two models. • The institutionalization of power model: A CEO has a greater chance at remaining in power the longer he/she has been in power. • The circulation of power view: The CEO’s tenure elapses, and the CEO’s time in office grows, coalitions are more likely to grow against the CEO and his/her views.

  4. Hidden Presuppositions • This structuralist view has hidden presuppositions. • These different views affect different people in the same ways. • CEOs left the company for the same reasons. • Did he or she leave voluntarily? • The real question: Can a CEO keep his/her job when the CEO wished to stay?

  5. Difference Between Two Models • Author differentiates between two models • Institutionalization model: Tenure will decrease the rate of CEO succession • Circulation of power: Tenure will decrease the rate of CEO succession • Bad economic times or performance puts pressure on CEO’s • Institutionalization model: accumulated power helps to buffer him/her. • Circulation of power model: exacerbates the challenges to CEO’s power • Undermines confidence in CEO. • Board tenure: inversely affects the later model • conversely affects the former model

  6. Method and Research • 120 randomly sampled industrial corporations: 4.45 percent of the population. • Company years 1960-1990 • 6 firms dropped resulting in n=114. • Uses statistical tricks to left and right center the data • effects of beginning in 1960 and ending in 1980 • Preserves as much as possible. • Uses control variables for firm sixe, and basic factual characteristics of CEO. • Clear logic to his data analysis and assumptions. • Presents data in various formats with brief explanations of significant effects.

  7. Final Results • Power logic is dominant during the first decade of tenure • Beyond that CEO begins cements position • During adversity, CEO’s prior board experience was a liability • Nature and stability of tenure is discussed in an illuminating way • Data analysis clear and rigorous • Highlights dynamics between the obsolescence of the CEO’s schemas and strategies • Highlights the attempts of the CEO to cement power • Mitigating effects of high board umber and internal board members

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