“The lack of independent leadership in firms that combine the CEO and Chairman positions makes it difficult for the board to remove poorly performing managers”

“The lack of independent leadership in firms that combine the CEO and Chairman positions makes it difficult for the board to remove poorly performing managers,” according to Vidhan K Goyal and Chul W Park in their paper published in the Journal of Corporate Finance. The board’s role does not end with having an emergency succession plan in place but it also needs to specify all the required criteria that will be used to select the next CEO. The board should also explain why those criteria are critical keeping the future business plans of the company in mind. This approach will go a long way in calming investor concerns.

The boards should do a lot of thinking about the potential candidate as well as about the one already sitting in that top notch position, else the productivity might be the one suffering the most even if the crisis is not enough grave.

It is important to understand turnarounds do not happen overnight; the process of steadying the ship and starting to sail again often requires patience and endurance.

Replacing the captain might help calm down public and show a little on the scorecard, but it may not be the best move for building a champion team. Read more..

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