Dominant CEOs Can Either Make or Break the Company

According to a recent study, dominant CEOs (Chief Operating Officer) can evoke extreme results for the company. The performance of a firm under an all powerful CEO can either be much better than the other companies or much worse. However, a company with strong board of directors can nullify the effect of a dominant CEO and take the company to new heights. This study is published in the Journal of Management Studies.

It was observed in the study that companies under strong CEOs like Bill Gates for Microsoft and Jack Welch for GE, have performed extremely well. On the other hand, a dominant CEO might prove disastrous for the employees as well as the shareholder, as in the case of Kenneth Lay for Enron. This makes an all powerful CEO a boon as well as a bane to the organisation.

To control the undesirable effect of a strong head of the company, it is imperative to have an equally strong board of directors. They act like watchdogs and provide valuable second opinions. This control by the board can stop any kind of strategy proposed by a strong CEO that might lead to the company’s failure.

Although a strong board of directors does not completely eliminates the possibility of the company’s downfall, it can counter the negative effects of a dominant CEO. A sound board of directors and a strong CEO is an ideal governance arrangement for any company’s success.

1 response to Dominant CEOs Can Either Make or Break the Company

  1. Strong CEO’s in a company they started are generally a vastly different animal from a corporate CEO. In a company that they started their shareholding is usually far greater and also their agenda far different.

    The make up and role of the board of directors should be to manage risk – this can only be done if they are objective and independent. In many cases this is not the case.

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