Searching for a Corporate Savior

Searching for a Corporate Savior: The Irrational Quest for Charismatic CEOs

Rakesh Khurana
Copyright Date: 2002
Edition: STU - Student edition
Pages: 320
https://www.jstor.org/stable/j.ctt28554w
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  • Book Info
    Searching for a Corporate Savior
    Book Description:

    Corporate CEOs are headline news. Stock prices rise and fall at word of their hiring and firing. Business media debate their merits and defects as if individual leaders determined the health of the economy. Yet we know surprisingly little about how CEOs are selected and dismissed or about their true power. This is the first book to take us into the often secretive world of the CEO selection process. Rakesh Khurana's findings are surprising and disturbing. In recent years, he shows, corporations have increasingly sought CEOs who are above all else charismatic, whose fame and force of personality impress analysts and the business media, but whose experience and abilities are not necessarily right for companies' specific needs. The labor market for CEOs, Khurana concludes, is far less rational than we might think.

    Khurana's findings are based on a study of the hiring and firing of CEOs at over 850 of America's largest companies and on extensive interviews with CEOs, corporate board members, and consultants at executive search firms. Written with exceptional clarity and verve, the book explains the basic mechanics of the selection process and how hiring priorities have changed with the rise of shareholder activism. Khurana argues that the market for CEOs, which we often assume runs on cool calculation and the impersonal forces of supply and demand, is culturally determined and too frequently inefficient. Its emphasis on charisma artificially limits the number of candidates considered, giving them extraordinary leverage to demand high salaries and power. It also raises expectations and increases the chance that a CEO will be fired for failing to meet shareholders' hopes. The result is corporate instability and too little attention to long-term strategy.

    The book is a major contribution to our understanding of corporate culture and the nature of markets and leadership in general.

    eISBN: 978-1-4008-4109-7
    Subjects: Management & Organizational Behavior, Business

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. PREFACE
    (pp. ix-xxii)
  4. CHAPTER 1 “EVERYONE KNEW HE WAS BRILLIANT”: THE WOOING OF JAMIE DIMON
    (pp. 1-19)

    In 1999, Chicago’s Bank One Corporation was headed for trouble. Many investors and board members believed that they knew the precise source of the problem: Bank One’s CEO, John McCoy.

    Although Bank One could trace its roots back to 1868, it was under McCoy’s stewardship that it had grown into a modern colossus. Appointed CEO in 1984, McCoy was one of the first bankers to take advantage of loosening restrictions on interstate banking. Beginning in 1986, Bank One purchased banks throughout the Midwest and Southwest. Within a decade, it had made over one hundred acquisitions, propelling it from the thirty-seventh...

  5. CHAPTER 2 A DIFFERENT KIND OF MARKET
    (pp. 20-50)

    The succession process that resulted in Jamie Dimon’s hiring as the CEO of Bank One followed an increasingly familiar script. A company’s performance declines, and the board responds by forcing out the incumbent CEO, who is blamed for its troubles. An external search is initiated with an extraordinary emphasis on hiring a candidate with demonstrable “leadership” and “charismatic” qualities. Much less emphasis is placed on the company’s strategic situation and how appropriate the background of the candidate is in light of this. The entire search process is orchestrated to produce a corporate “savior,” to find a new CEO whom investors...

  6. CHAPTER 3 THE RISE OF THE CHARISMATIC CEO
    (pp. 51-80)

    Not the least remarkable feature of the search that culminated in Bank One’s hiring of its star CEO, Jamie Dimon, was the way in which, by choosing Dimon, the board passed up an experienced, highly qualified executive who knew the company and its business well. Verne Istock, a University of Michigan graduate and MBA, was a highly regarded banker who had spent thirty-seven years working his way up the ladder at NBD Bancorp, of which he became chairman and CEO in 1994. NBD Bancorp was considered one of the best-managed regional banks in the country, and after one year at...

  7. CHAPTER 4 BOARD GAMES: THE ROLE OF DIRECTORS IN CEO SEARCH
    (pp. 81-117)

    There are two ways of understanding the role of corporate directors in external CEO search. One is based on the prevalent belief that actors in the external CEO market are what neoclassical economists say that actors in markets generally are: autonomous individuals rationally pursuing their self-interest in a context with a high degree of transparency. This approach focuses on the motives and behavior of the individual director. Today, this is perhaps the most commonly used method of accounting for directors’ roles in corporate governance. It is linked to the view that directors are fully motivated to act in the interests...

  8. CHAPTER 5 THE GO-BETWEENS: THE ROLE OF THE EXECUTIVE SEARCH FIRM
    (pp. 118-150)

    In chapter 4, we saw corporate directors engaged in the external CEO search process in ways that belie both conventional accounts of how that process works and existing theories purporting to explain it. Directors, we observed, give surprisingly little thought at the beginning of the search process (or at any point thereafter) to the strategic situation and needs of the firm, focusing their time and energy instead on creating a list of ill-defined, often contradictory qualities to be sought in a candidate and then ignoring these supposed requirements throughout the rest of the search. In defining and narrowing the pool...

  9. CHAPTER 6 CROWNING NAPOLEON: THE MAKING OF THE CHARISMATIC CANDIDATE
    (pp. 151-185)

    In 1999 and 2000, respectively, Lew Platt of Hewlett-Packard and Michael Hawley of Gillette joined the ranks of CEOs fromFortune500 companies forced out of their positions. They were only the newest additions to a nearly decade-old club whose founding members included John Akers of IBM, Paul Lego of Westinghouse, Robert Stempel of General Motors, and Kay Whitmore of Kodak. Hawley and Platt, like many of the other CEOs who had been forced out since the early 1990s, would subsequently be replaced by outsider successors. Like their counterparts on so many otherFortune500 boards in the era of...

  10. CHAPTER 7 OPEN POSITIONS, CLOSED SHOPS: LEARNING FROM THE EXTERNAL CEO SUCCESSION PROCESS
    (pp. 186-220)

    The external CEO labor market was born in a burst of rhetoric about wresting control of corporations away from a group of self-interested insiders, as senior managers in the era of managerial capitalism had come to be portrayed. Expanding CEO search beyond the confines of the internal labor market—or so the rationale for the practice supposed—would open the CEO position to a broader group of individuals who would bring greater talents and breadth of “vision” than could be found within any one company, and who had little vested interest in the status quo. The proponents of the external...

  11. APPENDIX Research Design, Methods, and Sample
    (pp. 221-236)
  12. NOTES
    (pp. 237-272)
  13. REFERENCES
    (pp. 273-288)
  14. INDEX
    (pp. 289-295)