Searching for a Sign: CEO Successor Selection in the Wake of Corporate Misconduct

We theorize about board decision making by introducing image theory, a descriptive theory of selection for decisions of more than routine importance, to research on CEO successor selection. We contend that directors’ current and future images of the firm typically revolve around their main responsib...

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Bibliographic Details
Published in:Journal of management 2022-04, Vol.48 (4), p.1035-1066
Main Authors: Connelly, Brian L., Shi, Wei, Walker, H. Jack, Hersel, Matt C.
Format: Article
Language:English
Subjects:
Candidates
Colleges & universities
Decision making
Directors
Intuition
Irony
Leadership
Misconduct
Wealth
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Summary:We theorize about board decision making by introducing image theory, a descriptive theory of selection for decisions of more than routine importance, to research on CEO successor selection. We contend that directors’ current and future images of the firm typically revolve around their main responsibility, maximizing shareholder wealth. However, following discovery of misconduct, those images shift to the misconduct and to how it might be prevented. As such, ethical leadership dominates their criteria for a CEO successor. Evaluating candidates’ moral principles is nontrivial; there are few observable indicators. We develop arguments that, following organizational wrongdoing, directors are more likely to choose a CEO successor with a degree from a religiously affiliated university than they would under other conditions. We also find their intuition is correct: Choosing a CEO with a degree from a religious university reduces the likelihood of misconduct. In moderating analyses, we uncover a hidden irony: Directors in industries where misconduct is common are the least likely to choose, but the most likely to need, a CEO with a degree from a religious university. Results from analyses of S&P 1500 firms and a policy capturing study of actual directors support our hypotheses.
ISSN:0149-2063
1557-1211
DOI:10.1177/0149206320924119