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Top Director Shake-up: The Link between Chairman and CEO Dismissal in the UK


  • Annita Florou

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      The author is from the University of Macedonia. She would like to thank Martin Conyon, Mike Devereux, Graham Sadler and Laura Read for their invaluable support and guidance. She appreciates the helpful comments of Philip Brown, Ian Davidson, Ken Peasnell, Simon Peck, Peter Pope, Shiva Shivakumar and seminar participants at Lancaster University and INSEAD. A special thanks also to Andrew Stark (a JBFA editor) Steven Young and an anonymous referee for their insightful suggestions. She also gratefully acknowledges financial support from the Economic and Social Research Council (Award number R00429924142) and PriceWaterhouseCoopers.

Annita Florou, University of Macedonia, Department of Accounting and Finance, 156 Egnatia Street, Thessaloniki 540 06, Greece.


Abstract:  Most UK companies separate the roles of CEO and Chairman. The former runs the company and the latter runs the board. Using turnover data on 2,180 separate Chairmanships of the top 460 UK firms over the 1990–1998 period, I find that the Chairman is more likely to be replaced when the CEO is dismissed. Detailed data on the dismissal events suggests that Chairman replacement is associated with board restructuring. This may be necessary to bring in different skills and experience which, in turn, might facilitate changes in future corporate decisions. Moreover, I find that the Chairman's previous position, or the type of Chairmanship, does not affect the association between Chairman removal and CEO dismissal. But, the increase in the dismissal likelihood of the Chairman at the time of forced CEO departure is higher when she is involved in the appointment of the failing CEO. This, in turn, can be interpreted as an indication of effective governance.