But there is one solution to an all powerful CEO: a strong board of directors. Companies with strong boards counteract powerful CEOS, and swing the tide of performance to the plus side. This study on dominating CEOs and powerful boards is now published in the Journal of Management Studies.
CEOs are typically the individual with the most power in the top management team for a company. Yet, casual observation has shown that some companies with strong CEOs, such as General Electric under Jack Welch or Microsoft as led by Bill Gates have performed tremendously well. Meanwhile, other companies have failed miserably, with often disastrous results for employees and shareholders, when the CEO is very dominant, such as Enron under Kenneth Lay.
The key idea is that a dominant CEO may lead a firm to a deviant strategy. This strategic deviance can yield a strong position for a firm in its markets, or it can drive it to big losses. To control the negative effects of strategic deviance, and balance the power of the CEO, a company needs a strong board of directors. A strong board provides a useful watchdog and a second set of valued opinions to the strategic direction of the company. This oversight by the board can help catch the deviant strategy that could lead to firm failure, before it is implemented by the CEO and the organization’s top management team.
Although strong boards can help counter the potential for big losses or even firm failure that comes from having a dominant CEO, the board does not completely eliminate such a possibility. Other mechanisms of firm governance need to be activated to also provide greater levels of caution against firm failure in light of an all powerful CEO.
Having a dominant CEO can place an organization in jeopardy, but it is a challenge that can be managed. As recommended by the authors of the study, “Having dominant CEOs is risky, but powerful boards help control the downside risk while leaving the upside potential relatively open. Thus, it is possible that coupling dominant CEOs with powerful boards represents an ideal governance arrangement.”
Bethany Carland-Adams | EurekAlert!
Europe’s Demographic Future. Where the Regions Are Heading after a Decade of Crises
10.08.2017 | Berlin-Institut für Bevölkerung und Entwicklung
Scientists reveal source of human heartbeat in 3-D
07.08.2017 | University of Manchester
Physicists at the University of Bonn have managed to create optical hollows and more complex patterns into which the light of a Bose-Einstein condensate flows. The creation of such highly low-loss structures for light is a prerequisite for complex light circuits, such as for quantum information processing for a new generation of computers. The researchers are now presenting their results in the journal Nature Photonics.
Light particles (photons) occur as tiny, indivisible portions. Many thousands of these light portions can be merged to form a single super-photon if they are...
For the first time, scientists have shown that circular RNA is linked to brain function. When a RNA molecule called Cdr1as was deleted from the genome of mice, the animals had problems filtering out unnecessary information – like patients suffering from neuropsychiatric disorders.
While hundreds of circular RNAs (circRNAs) are abundant in mammalian brains, one big question has remained unanswered: What are they actually good for? In the...
An experimental small satellite has successfully collected and delivered data on a key measurement for predicting changes in Earth's climate.
The Radiometer Assessment using Vertically Aligned Nanotubes (RAVAN) CubeSat was launched into low-Earth orbit on Nov. 11, 2016, in order to test new...
A study led by scientists of the Max Planck Institute for the Structure and Dynamics of Matter (MPSD) at the Center for Free-Electron Laser Science in Hamburg presents evidence of the coexistence of superconductivity and “charge-density-waves” in compounds of the poorly-studied family of bismuthates. This observation opens up new perspectives for a deeper understanding of the phenomenon of high-temperature superconductivity, a topic which is at the core of condensed matter research since more than 30 years. The paper by Nicoletti et al has been published in the PNAS.
Since the beginning of the 20th century, superconductivity had been observed in some metals at temperatures only a few degrees above the absolute zero (minus...
Researchers from the University of Miami (UM) Rosenstiel School of Marine and Atmospheric Science, the Italian Space Agency (ASI), and the Instituto Geofisico--Escuela Politecnica Nacional (IGEPN) of Ecuador, showed an increasing volcanic danger on Cotopaxi in Ecuador using a powerful technique known as Interferometric Synthetic Aperture Radar (InSAR).
The Andes region in which Cotopaxi volcano is located is known to contain some of the world's most serious volcanic hazard. A mid- to large-size eruption has...
16.08.2017 | Event News
04.08.2017 | Event News
26.07.2017 | Event News
16.08.2017 | Physics and Astronomy
16.08.2017 | Materials Sciences
16.08.2017 | Interdisciplinary Research