If we’ve learned anything from HBO’s critically acclaimed series “Succession” over the past four years, it’s that even the most influential individuals cannot succeed alone. In a thought-provoking article published in the Strategic Management Journal, the authors emphasize the importance of powerful allies for new CEOs like Tom and how these alliances influence their success in leadership positions.
The article, titled “Can powerful allies protect the CEO against performance declines? The role of the CEO’s subgroup power in CEO dismissal,” by Jihae You, Taekjin Shin, and Yunhyung Chung, delves into the intriguing concept of why some boards dismiss CEOs despite stellar performance, while others retain CEOs despite underperformance.
The key lies in the composition of the board of directors and the formation of subgroups within the board. These subgroups consist of directors who share common characteristics and identities, fostering a sense of unity and cohesion. The authors found that the power of a subgroup within the board significantly influences board decisions regarding CEO retention or dismissal. Specifically, a subgroup of directors who share social identities, such as gender, race, age, beliefs, values, and backgrounds with the CEO, can mitigate the risk of CEO dismissal, especially during periods of declining company performance.
But how does this dynamic work? When a CEO faces criticism or potential dismissal, the subgroup members experience insecurity and fear losing their ally, along with any advantageous resources or favors associated with their relationship with the CEO. This insecurity strengthens the bond within the CEO subgroup, leading them to protect the CEO and maintain the coalition by exerting their power over other board members.
Based on faultline theory and social identity theory, the authors analyzed two decades of data (1998-2018) from S&P 500 boards to support their findings. They highlight the importance of studying power dynamics at the subgroup level, as an individual’s power and influence can be shaped and influenced by the power of their close peers. This perspective provides a deeper understanding of how subgroup power impacts board decisions beyond the individual power of the CEO or other directors.
What does all of this mean for Tom Wambsgans and his new position at Waystar-Royco-GoJo in the world of “Succession”? While it’s too early to tell, Tom’s journey throughout the series has highlighted the significance of building relationships and strategically aligning with influential individuals. As the show’s avid viewers know, Tom understands the importance of power and has actively pursued it throughout the series. The groundwork he has laid in forming his own coalition will undoubtedly play a crucial role in his future endeavors.
More information: Jihae You et al, Can powerful allies protect the CEO against performance declines? The role of the CEO’s subgroup power in CEO dismissal, Strategic Management Journal (2023). DOI: 10.1002/smj.3526
Provided by Strategic Management Society
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Powerful board allies are a CEO’s best weapon, say researchers (2023, June 22)
retrieved 22 June 2023
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Shambhu Kumar is a science communicator, making complex scientific topics accessible to all. His articles explore breakthroughs in various scientific disciplines, from space exploration to cutting-edge research.
