2. Factors That Influence CEO Longevity
The author identifies two central factors that
influence CEO longevity:
1. Model of the institutionalization of power
2. Model of the circulation of power
Two competing frameworks.
Each model has a different way of viewing CEO
tenure.
Makes competing or complementary predictions,
which he then tests.
3. Ocasio’s Argument
Depends on the logics of the two models.
a) The institutionalization of power model: A
CEO has a greater chance at remaining in
power the longer he/she has been in power.
b) The circulation of power view: The CEO’s
tenure elapses, and the CEO’s time in office
grows, coalitions are more likely to grow
against the CEO and his/her views.
4. Hidden Presuppositions
This structuralist view has hidden presuppositions.
a) These different views affect different people
in the same ways.
b) CEOs left the company for the same reasons.
a. Did he or she leave voluntarily?
The real question: Can a CEO keep his/her job
when the CEO wished to stay?
5. Difference Between Two Models
Author differentiates between two models
o Institutionalization model: Tenure will decrease the rate of
CEO succession
o Circulation of power: Tenure will decrease the rate of CEO
succession
Bad economic times or performance puts pressure on CEO’s
Institutionalization model: accumulated power helps to buffer
him/her.
Circulation of power model: exacerbates the challenges to
CEO’s power
o Undermines confidence in CEO.
Board tenure: inversely affects the later model
o conversely affects the former model
6. Method and Research
120 randomly sampled industrial corporations: 4.45 percent
of the population.
Company years 1960-1990
6 firms dropped resulting in n=114.
Uses statistical tricks to left and right center the data
o effects of beginning in 1960 and ending in 1980
Preserves as much as possible.
Uses control variables for firm sixe, and basic factual
characteristics of CEO.
Clear logic to his data analysis and assumptions.
Presents data in various formats with brief explanations of
significant effects.
7. Final Results
Power logic is dominant during the first decade of tenure
Beyond that CEO begins cements position
During adversity, CEO’s prior board experience was a
liability
Nature and stability of tenure is discussed in an
illuminating way
Data analysis clear and rigorous
Highlights dynamics between the obsolescence of the
CEO’s schemas and strategies
Highlights the attempts of the CEO to cement power
Mitigating effects of high board umber and internal board
members