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!
Drought hits rivers first and more strongly than agriculture
06.09.2018 | Max-Planck-Institut für Biogeochemie
Landslides triggered by human activity on the rise
23.08.2018 | European Geosciences Union
Our brain is a complex network with innumerable connections between cells. Neuronal cells have long thin extensions, so-called axons, which are branched to increase the number of interactions. Researchers at the Max Planck Institute of Biochemistry (MPIB) have collaborated with researchers from Portugal and France to study cellular branching processes. They demonstrated a novel mechanism that induces branching of microtubules, an intracellular support system. The newly discovered dynamics of microtubules has a key role in neuronal development. The results were recently published in the journal Nature Cell Biology.
From the twigs of trees to railroad switches – our environment teems with rigid branched objects. These objects are so omnipresent in our lives, we barely...
The Fraunhofer FEP has been involved in developing processes and equipment for cleaning, sterilization, and surface modification for decades. The CleanHand Network for development of systems and technologies to clean surfaces, materials, and objects was established in May 2018 to bundle the expertise of many partnering organizations. As a partner in the CleanHand Network, Fraunhofer FEP will present the Network and current research topics of the Institute in the field of hygiene and cleaning at the parts2clean trade fair, October 23-25, 2018 in Stuttgart, at the booth of the Fraunhofer Cleaning Technology Alliance (Hall 5, Booth C31).
Test reports and studies on the cleanliness of European motorway rest areas, hotel beds, and outdoor pools increasingly appear in the press, especially during...
The building blocks of matter in our universe were formed in the first 10 microseconds of its existence, according to the currently accepted scientific picture. After the Big Bang about 13.7 billion years ago, matter consisted mainly of quarks and gluons, two types of elementary particles whose interactions are governed by quantum chromodynamics (QCD), the theory of strong interaction. In the early universe, these particles moved (nearly) freely in a quark-gluon plasma.
This is a joint press release of University Muenster and Heidelberg as well as the GSI Helmholtzzentrum für Schwerionenforschung in Darmstadt.
Then, in a phase transition, they combined and formed hadrons, among them the building blocks of atomic nuclei, protons and neutrons. In the current issue of...
Thin-film solar cells made of crystalline silicon are inexpensive and achieve efficiencies of a good 14 percent. However, they could do even better if their shiny surfaces reflected less light. A team led by Prof. Christiane Becker from the Helmholtz-Zentrum Berlin (HZB) has now patented a sophisticated new solution to this problem.
"It is not enough simply to bring more light into the cell," says Christiane Becker. Such surface structures can even ultimately reduce the efficiency by...
A study in the journal Bulletin of Marine Science describes a new, blood-red species of octocoral found in Panama. The species in the genus Thesea was discovered in the threatened low-light reef environment on Hannibal Bank, 60 kilometers off mainland Pacific Panama, by researchers at the Smithsonian Tropical Research Institute in Panama (STRI) and the Centro de Investigación en Ciencias del Mar y Limnología (CIMAR) at the University of Costa Rica.
Scientists established the new species, Thesea dalioi, by comparing its physical traits, such as branch thickness and the bright red colony color, with the...
21.09.2018 | Event News
03.09.2018 | Event News
27.08.2018 | Event News
26.09.2018 | Trade Fair News
26.09.2018 | Life Sciences
25.09.2018 | Health and Medicine