Resultados de las encuestas a los empleados de la COAC Bashalán Ltda

CEO changes are very important economic events as they signal potential performance improvements as well as major operational, structural and strategic transformations. The importance of CEO turnover depends, therefore, on the extent to which it leads to real changes in the firm in which it occurs such as the divestitures of unprofitable acquisitions, employee layoffs, good replacement decisions or even other non-CEO changes. The issue of major organisational changes following the CEO changeover event has attracted considerable attention from organisational theorists.

Specifically, the belief that a new CEO will initiate major policy shifts is frequently espoused in the financial press and often labelled the “common-sense” or “great person” theory of executive succession (Guest 1962; Reinganum 1985). According to the above argument, leaders make a difference - they have discretion and influence -and the arrival of a new manager in the top office may result in good possibilities for subsequent organisational changes. A new CEO, therefore, will most likely avoid some of his/her predecessor's mistakes and signify important changes in the policies and strategies of the firm. This chapter argues that changes in the identities of other members of the top management team may provide a critical variable by which to evaluate the link between CEO turnover and organisational transformation.

Indeed, non-CEO departures may yield valuable insight into the mechanisms by which organisational changes (e.g. selling of unprofitable acquisitions, downsizings etc.) are implemented. That is, if CEO departures are related with other organisational changes how are these changes implemented? Do new CEOs implement changes by re-directing existing managers to adjust their strategies and actions, perhaps by changing the ways in

which performance of those managers is measured and rewarded? Or is organisational change difficult to implement with the pre-existing management team, necessitating changes in the identities of the firm’s remaining top decision makers as well?

In this case, the replacement of other top managers may enable the new CEO to: a) get rid of those old lieutenants who appear to be shirking their duties, b) to hire new lieutenants who are loyal to the successor, and c) to weaken those in company's broader management team who might oppose the leader's new policies. In general, as Helmich and Brown (1972, p.371) summarise “the use of strategic replacements empowers the new manager to form a new informal social circle, which revolves about himself and supports his own status and policies”.

Consequently, departures from the firm’s remaining top positions in the period surrounding CEO turnover can be another important organisational change. This is particularly true for the Chairman position, whose role as mentioned in the previous section, is both very different from that o f the rest executive management team and very important for the company’s success. Moreover, the Chairman may be one o f those old lieutenants that is particularly aligned with the departing CEO and therefore, he - above all other directors - must be replaced. In this case, Chairman departures - initiated either by internal monitoring mechanisms (e.g. board of directors) and/or by the new CEO - is believed to be a vital necessity for the successful implementation of the company’s new programme. Hence, it is predicted that:

H2: There should he a positive association between concurrent or subsequent Chairman departures and Most Senior Executive turnover.

An important implication of the above arguments is that organisational restructurings are especially needed following poor firm performance. Some authors have argued that top management departures (other than the CEO) are an essential ingredient of turnaround strategies. Starbuck and Hedberg (1977, p.256), for example, contend that “top management as a group must be replaced for a turnaround strategy to succeed”. Similarly, Hofer (1980, p.25) argues that “a precondition for almost all successful turnarounds is the replacement of the current top management of the business in question”. In other words, the establishment of new policies, the implementation of major transformation plans and the shake-up of existing management teams are particularly needed in those firms that exhibit deteriorating performance. Hence, it is predicted that:

H3: The positive correlation between Chairman departures and MSE turnover is expected to be more pronounced in the poorly performing companies.

Moreover, the impact o f CEO turnover on subsequent changes can be largely dependent on the circumstances surrounding the predecessor CEO's departure and its potential for organisational disruption. Accordingly, forced removal is argued to be significantly disruptive to organisational routines and processes when compared to a natural turnover. Indeed, the process by which chief executives are fired is a complex event characterised by significant political interactions between internal managers, directors, and outside interests such as investors and the media (Hirsch 1986; Ocasio 1994).

Although organisational consequences of CEO turnover are predicted to be more severe

if the departing CEO is forced out, the relation between Chairman turnover and forced

CEO changes is more controversial. On one hand, a highly effective Chairman who monitors the top management team and replaces an under-performing CEO is less likely to leave, precisely because he has done the monitoring job remarkably well. However, on the other hand, a poorly performing CEO - reflected in poor returns to shareholders - suggests that the Chairman was not doing his job properly and therefore, he needs to be replaced as well.

Hence, although it is widely argued that forced CEO turnover may cause larger

organisational changes the existence of a Chairman turnover -forced CEO departure

relation per se is open to debate. Of course, if such an association is evident, then it

could be argued that forced CEO turnover might have a stronger impact on the Chairman change likelihood than non-forced CEO turnover. This study contributes to the above debate by examining the following hypothesis:

H4: The positive correlation between Chairman departures and MSE turnover is expected to be more pronounced i f the departing MSE is forced out.