Corporate governance|Prepare to tell long-serving bosses their time is up

Prepare to tell long-serving bosses their time is up

By Andrew Hill

October 8, 2018

On 8th October 2018, an article on corporate governance in the Financial Times discussed the replacement of long-serving bosses. The article has debated individual cases of different chief executives in different companies and their group accountability while serving the company such as Mr. Ian Read, Pfizer CEO, Mr. Musk Tesla CEO and Mr. Flannery CEO General electric. The articles reveal that with time, a leader of an organization begins to feel very pleased about their achievements hence feeling that they do not need to do anything about their situation.

Leadership is becoming dangerous due to the fact that complacency is becoming a normal thing. Changing times require a change in the approaches of leadership style due to the competitive pressures which are in existence (Drucker, 2012). Ideally, when the leadership of an organization becomes complacent it is clear that the organization is probably falling a victim of legacy perception. This is because the complacency causes the chief executive to become reluctant to challenges because they are comfortable with their position. The outcome is that they are positioning themselves and the organization for a future disaster. Thus, the ultimate solution to ending complacency of chief executives in an organization is planning for the replacement after a long term contract.

Ideally, the ability of a company to manage social, environmental and governance matters illustrates that the leadership and good governance that is important for sustainable growth. Ideally, companies that have robust corporate governance structures are likely to achieve greater long-term financial performance and facilitate more effective management of opportunities and risks. Corporate governance is considered as a set of practices, rules, and processes through which a firm is controlled and directed. This involves matching the interest of the organization, shareholders, suppliers, customers, administration, financiers as well as the community.

According to the article, one should be able to categorize the list of chief executives into three which are the interchangeable, indispensable and irredeemable. The shareholders play a significant role in governance through the selection of directors and executives to satisfy effective corporate governance structures. Considerably there comes a point where complacency affects a leader who then begins to follow rather than leading (Tricker, 2015). Over time the leaders tend to lose respect, loyalty, and trust from their stakeholders as well as other leaders in the organization. Relatively, crisis lead to shortened tenure while long tenure is a sign of good times and effectiveness. The article has revealed an instance of long-term serving bosses who were replaced despite their vital success. For instance, the United States securities exchange commission decided that Elon Musk should renounce chairmanship despite his vital contribution to the success of Tesla. This was a part of the deal over corporate governance hence was allowed to sate as one of the chief executives.  On the other hand, Ian Read Pfizer chief executive of the world biggest pharmaceutical company was to be replaced with another insider after serving for eight years in the company. General electric replaced elected John Flannery barely succeeded the group for a period of one year and exchanged him with Larry Culp, an outsider, and an executive, in his place.

Learning to distinguish whether a CEO is acting to the best interest of shareholders and the company is the first step in digging long term into their performance (Goergen, 2012). According to the Conference Board, the replacement of these executives corresponds to the requirements if corporate responsibility. Handling fundamental business responsibly is an essential prerequisite for ensuring long-term success and competitiveness. Thus, a boss should be aware of the corporate responsibility to the society, environment and employees. The conference board revealed that the United States business group prepared annual records in the evaluation of chief directors. It was found out that chief executives that participated effectively in the group management do enjoy more job security as they are used to. For instance, Mr. Read who has been the chief executive of Pfizer has enjoyed greater job security hence working for the company for eight years. In the article, Mr. Read states that he ruled on his succession as thoughtful and smoothed planned progression after almost eight years as a CEO. As a matter of fact, it is clear that after he was made the CEO of the company in 2010 he has been in position for eight years, which is the average term for being a US chief executive. On the contrary, bosses that fall short of their duties are facing Mr. Flannery outcome. The article reveals that the number of underperforming companies that have exchanged their chief directors in 2017 has done it at a rate which is three times quicker than the outperformers. Ideally, this is how government should work to ensure the sustainable performance of the organization. The underperformance of a leader is contributed by complacency.

When a leader begins to get complacent, the indispensable becomes fixed. All such averages have been as a result of many individual cases of becoming immovable (Tricker, 2015). For instance, Mr. Musk who behaves as if he is the founding chief executive is as a result of complacency. A founder CEO often stays for a longer period for a number of sensible causes that are associated to their deep familiarity, skills and leadership potentials. This gives them a room to maneuver. Ideally, replacing a founder Chief executive is not a small matter. This is because the founder chief executive is the core around which a startup builds up. Thus, replacing a Founder-CEO requires is a highly decisive task for the replacement of such a long-serving boss.

The article has stated that academic journal have suggested that long-serving and older chief executives have a tendency of underperforming. The reasons for keeping these individuals on longing for past glories and boardroom chubbiness come to be less convincing. Ideally, the reluctance to replace and change people in the management embeds itself in the culture of the organization. On the other hand, the incoming chief executive will be tempted to load their benefit and favor investment decisions with positive short influence. This is the time when the board should come in. The board of directors has the responsibility of preparing the existing long-standing unavoidable chief executive in a successful succession plan similar to that of Pfizer style “thoughtful and smooth”. Additionally, they have a responsibility of setting long-term incentives for the replacement of the chief executives.

The various case studies of individual CEOs of different companies in the US business group present the context of corporate governance and the change in management which are confronted by the business cycle. The argument in the article is that the needs of the chief executives should be matched with the needs of the business in such a way that the gap between the capabilities and the requirement of the company are closed.  Because of the changing nature and operation in the business cycle, the articles states that the imperative board of directors should constantly evaluate the leadership and strategy of governance. The article maintains that progress and change are essential for the companies in order to form a social contract of common values and commitment to the shareholders by addressing the challenges in the strategy of the business system. As organizations are planning to reinvent themselves, the article has offered effective tips for enhancing effective corporate governance to boost their performance.


Drucker, P. (2012). Managing in a time of great change. Routledge.

Goergen, M. (2012). International corporate governance. Pearson Higher Ed.

Prepare to tell long-serving bosses their time is up. Available at:

Tricker, R. B., & Tricker, R. I. (2015). Corporate Governance: Principles, policies, and practices. Oxford University Press, USA.

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