Logics in Corporate Control: Strategic Refocusing, Performance, and Outsider CEO Succession, 1984-2007

• In Event: 413 - Section on Organizations, Occupations and Work Refereed Roundtable Session. Table 01. Culture and Organizations
  In Refereed Roundtable 100min: Table 03. Governance

Abstract

Prior attempts to show the impact of poor performance on outsider CEO succession have yielded mixed results. We attribute this inconsistency to the existence of predominant institutional logics that operate as evaluative models of organizational actions and leadership qualities within fields. We propose that while boards tend to perceive a need for strategic change during poor performance and accordingly select outside successors, they are more likely to do so when they acknowledge that their CEOs have taken actions that violate prevailing logics. We test this argument in large U.S. firms from 1984 to 2007, when the field of these firms was characterized by the prominence of the shareholder-value logic that that implied corporate refocusing through de-diversification, asset divestiture, and employment downsizing as appropriate organizational conduct. Quantitative analyses indicate that poor performance tended to increase outside succession rates, but this performance impact became intensified when there was evidence that predecessor CEOs had not pursued strategic refocusing. Furthermore, outside successors were shown to be more willing than inside successors to promote strategic reorientations towards the shareholder-value logic. These findings imply that outsider CEO succession serve as a critical mechanism through which organizations adapt to changes in their normative environments.

Authors

• Shoonchul Shin, University of California Berkeley

• Juyoung Lee, Brown University