The Wall Street Journal takes a look (subscription required) at a tough question involving corporate governance: Does the chaos that can ensue when a CEO is dumped (to say nothing of the big severance packages) often make it better to keep a marginal executive? As the cliche goes, the devil you know is better than the devil you don't.
While we can debate about whether boards are too slow or too quick to ditch wayward executives, there's no question that they've gotten a lot more proactive in recent years. To learn about the causes of this trend, and for analysis of what effect it will have on the long-term profitability of corporate America, check out Revolt in the Boardroom.
Given the supine role that boards have generally played throughout history, it's tempting to see any shift toward a greater willingness to fire people as a good thing. But at some point, trigger-happiness could make executives too short-sighted and stock-price oriented (sagging stock prices generally attract the ire of activist hedge funds).
But I would argue that we are a long, long way from that point. There are still many, many more incompetent executives who should be fired than great executives who were unjustly given the ax.
Are boards becoming too quick to fire CEOs?
Posted Oct 22nd 2007 7:00PM by Zac Bissonnette
Filed under: Management, Newspapers
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