Title

New Ceos Pursue Their Own Self-Interests By Sacrificing Stakeholder Value

Keywords

Chief executive officer; Executive succession; Pension funding; Research and development; Self-interested behavior; Stakeholders

Abstract

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.

Publication Date

4-11-1999

Publication Title

Journal of Business Ethics

Volume

19

Issue

3

Number of Pages

301-308

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1023/A:1005961518518

Socpus ID

0033545717 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/0033545717

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