The Boardroom Battleground: Social Networks and CEO Dismissal

Abstract

This study draws on social capital theory and social network analysis literature to examine the research question of when CEOs are dismissed. It views CEO dismissal as a contest between the board and the CEO powered by their position within the upper echelons social networks. We test hypotheses on firms listed in Standard and Poor’s ExecuComp for the period 2000-2018 using a Cox (1972) semiparametric proportional hazard model. Findings show that the higher the network centrality of directors in the upper echelons social networks, the more likely they are to dismiss the CEO. In addition, this relationship is negatively moderated by the overlap of the CEO’s and the directors’ social networks, especially with directors who hold central positions in the network. The study extends the literature on the socio-political perspective as it finds that the directors’ social networks affect CEO dismissal. Findings have implications for the criteria used to select board directors.