IGNORING RULES OF SUCCESSION: HOW THE BOARD REACTS TO CEO ILLNESS ANNOUNCEMENTS

Leadership is an important component of successful corporate governance. CEO succession has received considerable attention in the extant literature. Succession planning's importance may need to be given top priority by boards of directors (Shen & Cannella,

Business Credit Solutions

• Get a Credit Report
• Get a D&B D-U-N-S Number
• Monitor My Business Credit - FREE TRIAL!

Business Credit Advice

• Business Credit Basics
• Build My Business Credit
• Extend Credit to Customers
• Use My Credit to Get Loans

Ocasio (1999) analyzed the succession process and the rules that govern it. He argued that rules of behavior exist throughout all areas of corporate activity providing regularity and structure to corporate decisions. The succession process provides an interesting case in which we can observe how boards rely on formal and informal rules to make decisions. There may be cases in which companies are unable to utilize succession rules because the need for succession is unanticipated and occurs suddenly.

There are a number of ways in which unanticipated events could lead to the immediate need for succession. For example, a CEO could suddenly decide to quit the company leaving the board with an immediate succession decision. However, in these cases, it may not be possible to determine if it was the CEO's decision or a forced turnover. Alternately, a CEO could die while in office or become ill or injured. We examine unanticipated succession decisions following CEO illness/injury announcements rather than CEO death, because when a CEO dies there is no choice; the board must appoint a successor. However, when a CEO is ill or injured, the executive and board may have a choice. They can appoint a successor or depending on the severity of the affliction let the CEO attempt to continue. We examine both the successions that occur after injury or illness announcements and decisions to let the CEO continue in office.