New CEOs pursue their own self-interests by sacrificing stakeholder value
Abbreviated Journal Title
J. Bus. Ethics
chief executive officer; executive succession; pension funding; research; and development; self-interested behavior; stakeholders; EXECUTIVE SUCCESSION; PERFORMANCE; MANAGEMENT; OWNERSHIP; FIRM; Business; Ethics
Short-term performance increases that are sometimes observed after CEO successions may be evidence of self-interested behavior. New CEOs may cut allocations to long-term investment areas such as research and development (R&D), capital equipment and pension funds in an effort to drive up short-term profits and secure their positions. However, such actions have unfavorable consequences for some stakeholders. This study provides evidence that both R&D and pension funding are reduced subsequent to a succession, even after accounting for industry trends. The expected short-term profitability increases are also observed. A major implication of these results is that boards of directors and other interested parties should carefully monitor the actions of new CEOs with regard to their treatment of R&D and pension funding if they would like to prevent such actions from occurring. This study also highlights the need to investigate other potential self-interested behaviors of new CEOs.
Journal of Business Ethics
"New CEOs pursue their own self-interests by sacrificing stakeholder value" (1999). Faculty Bibliography 1990s. 2669.