Conservative boards more likely to dismiss CEO

December 03, 2019

SMU Office of Research & Tech Transfer - When considering an organisation's long-term survival, existential threats that come to mind include external competition or technological disruption. But a potential threat lurks within the firm itself - organisational misconduct among employees can destroy billions of dollars of market value and result in lasting reputational damage.

In cases of financial misconduct, organisations have been known to take strong actions such as dismissing the CEO. Curiously, some boards prefer to take limited or no action toward the CEO, even if it results in criticism that they are deficient in their oversight role.

While the past literature on corporate governance covered board independence and loyalty to the CEO, none examined how the political ideology - a set of beliefs and values - held by board members can also influence the process of CEO dismissal. This gap in knowledge piqued the interest of David Gomulya, Assistant Professor of Strategic Management at the Singapore Management University (SMU) Lee Kong Chian School of Business.

"The earliest trigger for my interest in this research topic was the Great Recession that started in 2007 which affected many people," he said. "It was puzzling why not all CEOs are replaced if their firms restated their earnings downward because, at least symbolically, CEOs are usually replaced to signal that the firm is serious in correcting for its mistakes."

In an article published in Strategic Management Journal, titled "Political ideology of the board and CEO dismissal following financial misconduct", Professor Gomulya and colleagues examined US S&P 1500 firms that were charged with financial misconduct and required by the Securities and Exchange Commission to restate their earnings within the ten-year period from 2003 to 2012.

To assess a board's political ideology, the researchers used a scoring system for each board director that ranged from -1 to +1. A score of -1 indicated that all donations were made to the Democratic Party while a score of +1 indicated that all donations were made to the Republican Party.

According to their study, politically conservative boards were more likely to respond by dismissing the CEO than would liberal boards. "Our findings suggest that the ideology of board members can influence critical actions that they take," he said.

By incorporating an important but often overlooked aspect of corporate governance, Professor Gomulya hopes that his study on political ideology and CEO dismissal will complement existing literature on organisation-level behaviours and outcomes.

"We hope this study spurs future research to better understand the interaction between the beliefs of key decision makers and their actions," he said. "Recent trends in politics and business seem to suggest that such factors, although perhaps irrational, may play a larger role than we probably give credit for."
-end-
For more information, please contact:

Goh Lijie (Ms)
Office of Research & Tech Transfer
DID: 6828 9698
Email: ljgoh@smu.edu.sg

Singapore Managment University

Related Ideology Articles from Brightsurf:

Conservatives and liberals motivated by different psychological factors, new study shows
Liberalism and conservatism are associated with qualitatively different psychological concerns, notably those linked to morality, shows a new study that explores how political ideology and moral values are connected to motivated social cognition.

When it comes to supporting candidates, ideology trumps race and gender
Voters who express prejudice against minorities and women are still more likely to support candidates who most closely align with their ideologies, regardless of the race or sex of such candidates, according to research published by the American Psychological Association.

Political 'oil spill': Polarization is growing stronger and getting stickier
Experts have documented that political polarization is intensifying in the United States.

Government health, safety regulations backfire with conservatives, study shows
A new study from the University of Notre Dame shows government-imposed restrictions can backfire, depending on political ideology.

Do democracies behave differently from non-democracies when it comes to foreign policy?
The question of whether democracies behave differently from non-democracies is a central, and intense, debate in the field of international relations.

Majority in national survey against separating immigrant families at US/Mexico Border
A clear majority of participants in a national survey about the zero-tolerance policy on the United States/Mexico border strongly opposed separating immigrant families and charging the parents as criminals, according to Baylor University research.

From disseminating ideology to financing: How extremist networks operate
Key players in radical Islamic and extreme right-wing groups make use of similar strategies to mobilize support on social media.

Social studies teachers link their political views to assessment of news sources
At a time when there's been a sharp uptick in partisan critiques of the credibility of the news media and growing concern among educators about student media literacy, a new study finds a strong connection between high school social studies teachers' political ideology and how credible they find various mainstream news outlets.

Consider workplace AI's impact before it's too late, study says
The paper, ''Beyond Design and Use: How Scholars Should Study Intelligent Design Technologies,'' states that scholars and policymakers need to start thinking about it far more broadly if they want to have a say in what the future looks like.

Strict adherence to traditional masculinity associated with more severe PTSD in vets
To help service members perform better in the field, military training emphasizes the importance of certain traits associated with traditional masculinity, including suppression of emotion and self-reliance.

Read More: Ideology News and Ideology Current Events
Brightsurf.com is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.