Many observers consider the most important responsibility of the board of directors its responsibility to hire and fire the CEO. To this end, an interesting situation arises when a CEO resigns and the board chooses neither an internal nor external candidate, but a current board member as successor. Why would a company make such a decision? In this Closer Look, we examine this question in detail.
• What does it say about a company’s succession plan when the board appoints a current director as CEO?
• What is the process by which the board makes this decision?
• Are directors-turned-CEO the most qualified candidates, or do they represent a stop-gap measure?
• What does the sudden nature of these transitions say about the board’s ability to monitor performance?
The Closer Look series is a collection of short case studies through which we explore topics, issues, and controversies in corporate governance and executive leadership. In each study, we take a targeted look at a specific issue that is relevant to the current debate on governance and explain why it is so important. Larcker and Tayan are co-authors of the books Corporate Governance Matters and A Real Look at Real World Corporate Governance.