Don’t You Dare Knock Them Off Their Pedestal: Decline of Firm Status and CEO Dismissal

Seok-hyun Hwang, Ithai Stern

    Research output: Chapter in book/report/conference proceedingConference contributionpeer-review

    Abstract

    We analyze how a firm’s decline in status affects the likelihood of CEO dismissal. Our theoretical argument suggests that considering that firm-level status decline may cause outside directors’ own status to deflate, status-anxious outside directors will exhibit a greater likelihood of dismissing their CEO, independent of the firm’s financial performance. In addition, we theorize that the effect of firm-level status decline on CEO dismissal will be weaker for higher-status boards, or the boards consisting of a greater proportion of high-status outside directors, because high-status outside directors are equipped with a psychological buffer derived from their own status against firm- level status decline and thus feel lesser status anxiety than others. An analysis of a matched sample of S&P 500 firms who lost their S&P 500 membership between 1997 and 2012 and their counterparts who maintained their membership in the same period strongly supports our predictions. Thus, our theory and findings highlight the importance of considering the role of outside directors’ status-seeking motive in understanding CEO dismissal. Implications and future directions are discussed.
    Original languageEnglish
    Title of host publicationAcademy of Management Proceedings 2017
    EditorsSonia Taneja
    PublisherAcademy of Management
    DOIs
    Publication statusPublished - 1 Aug 2017
    Event77th Annual Meeting of the Academy of Management, AOM 2017: At The Interface - Atlanta, United States
    Duration: 4 Aug 20178 Aug 2017
    https://aom.org/events/annual-meeting/past-annual-meetings/2017-at-the-interface (Conference website)
    https://journals.aom.org/toc/amproc/2017/1 (Conference proceedings)

    Publication series

    NameAcademy of Management Proceedings
    Number1
    Volume2017
    ISSN (Print)0065-0668
    ISSN (Electronic)2151-6561

    Conference

    Conference77th Annual Meeting of the Academy of Management, AOM 2017
    Country/TerritoryUnited States
    CityAtlanta
    Period4/08/178/08/17
    Internet address

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