Top Director Shake-Up : The Link between Chairman and CEO Dismissal

Most UK companies separate the roles of CEO and Chairman. The former runs the company, the latter runs the board and the two directors interact to a great extent. Using turnover data on 2180 separate chairmanships of the top 460 UK companies over the 1990-1998 period, I find that the Chairman is six times more likely to be replaced when the CEO is dismissed. Moreover, the Chairman's previous position or the type of chairmanship does not affect the association between Chairman and CEO removal. But, the Chairman is four times more likely to be penalised when he is involved in the appointment of the departing CEO. Evidence on the dismissal events suggests that Chairman replacement enables the appointment of a new CEO and other directors with different human capital, which in turn facilitates changes in future corporate decisions