Top Director Shake‐up: The Link between Chairman and CEO Dismissal in the UK

Abstract

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. Copyright Blackwell Publishers Ltd, 2005.

Firm Performance and Managerial Succession in Family Managed Firms

“…We estimate logit regressions of all CEO turnover and forced CEO turnover, and present these results in Panels A and B of Table 3 respectively 12 . We follow Weisbach (1988) and Florou (2005) in examining firm performance based on IROA and M‐adj rtrn . We expected to observe a negative relationship between these variables and CEO turnover (Warner et al, 1988; Weisbach, 1988; and Dedman and Lin, 2002).…”

“…Secondly, we offer new evidence on the determinants of top management turnover in cases where top management has the potential to be entrenched. Existing UK research in this area has tended to focus on the general relationship between CEO turnover, managerial ownership and firm performance (see Conyon and Florou, 2002; and Hillier et al, 2005), or the interaction between various categories of top management turnover (see Florou, 2005). We extend this research to consider the specific case where the CEO has the potential for entrenchment through their status as a family manager.…”

The discretionary effect of CEOs and board chairs on corporate governance structures

“…Shivdasani and Yermack (1999) show that independent directors are less likely to effectively monitor executives when the CEO is involved in the director selection. Florou (2005) find a significant relation between chair removal and CEO dismissal in the U.K. She suggests that the replacement of the chair of the board in these cases enables subsequent governance restructuring, which requires new perspectives and abilities. More recently, Boone et al (2007) present evidence consistent with the board independence resulting from a negotiation between the CEO and the board of directors.…”

Quién es quién en la investigación sobre Reestructuración de la Cartera de Negocios: La estructura intelectual

“…In the first case, the process begins through the internal mechanisms of corporate governance, the product market itself or pressure from institutional investors (John et al, 1992;Robbie and Wright, 1995;Seward and Walsh, 1996). In the second case, the decision to restructure or not is triggered by external mechanisms such as takeovers or capital market threats that may affect the control of the firm (Bergh and Lawless, 1998;Florou, 2005).…”