CEOs are rarely dismissed for poor company performance due to their influence on boards. This article examines how boards with military experience address CEO underperformance more effectively. It analyzes three key accountability principles adopted from the military and suggests how any board can implement them to oversee their CEO's performance.
CEOs are seldom dismissed when the company they lead underperforms, in part because they wield considerable power over the board. So how can boards more effectively enforce CEO accountability in the face of poor performance? The authors recently analyzed boards of 865 U.
S.-listed manufacturing firms between 2010 and 2020 and identified an often-overlooked source of accountability principles: the military. Boards with directors who have military experience, they found, are more decisive in addressing CEO underperformance, often opting to dismiss the CEO when necessary. In this article, they discuss three key accountability principles that these directors have brought with them from the military — and explain how any board can make use of these principles in overseeing their company’s CEO. When a company starts to struggle, all eyes turn to the CEO. Shareholders demand results, employees seek direction, and internal contenders begin analyzing vulnerabilities and positioning themselves for the top job. There’s a strong expectation for the CEO to resolve the problem or face removal. But not always in the boardroom, where directors are reluctant to make bold, decisive moves and instead engage in drawn-out debates that sidestep critical issues. Even in the face of recurring underperformance, many boards choose to retain their CEOs for extended periods.is an associate professor of strategy at the Frankfurt School of Finance and Management. His work has been published in top strategy and management journals, among them theis a professor and the chair in international management at the University of Zurich, Switzerland. He is a partner at the Next Advisors and the coauthor, with Marianna Zangrillo, of
BOARD GOVERNANCE CEO ACCOUNTABILITY MILITARY LEADERSHIP PERFORMANCE MANAGEMENT STRATEGIC DECISION-MAKING
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