The issue is less the amount that is paid than the lack of relationship between CEO pay and corporate performance. This area may be a fruitful one for boards of directors who are currently reviewing the compensation policies of their firms. Separate comments are provided by Robert N. McDowell, Robert H. Meehan, Richard A. Hansen, and Michael A. Guthman. Examination is made of how presuccession organizational performance and organizational size influence stockholder reactions to succession events in large corporations around the time that the succession occurs. Data were gathered from responses from the senior-ranking human resources officers in Fortune 500 firms because they were considered to be the best informed about issues of succession and related management practices and policies.
Results support the idea that stockholder reactions to successions are heterogeneous.
In the context of poor presuccession performance, it is found that positive reactions greet board-initiated successions. When performance has been poor, successions are viewed as adaptive. Successions that result from a CEO's death or disability tend to meet with negative reactions, regardless of performance. In addition, the association between team size and CEO dominance, and firm performance, is significant in an environment that allows top managers high discretion in making strategic choices but is not significant in a low-discretion environment. Thus, environmental turbulence and discretion appear to operate as complementary constructs.