Are Dominant CEOs the Saviors of Troubled Firms?

This study examines the appointment of dominant CEOs for troubled (i.e., poorly performing) firms and its implications for firm strategy and performance. With a sample of firms from the U.S. computer hardware and software industries that experienced CEO succession during the period 1994-2001, we found that troubled firms were more likely to appoint dominant CEOs than non-troubled firms. Newly appointed dominant CEOs undertook less strategic change than non-dominant CEOs in troubled situations, but undertook more strategic change in non-troubled situations. However, they performed no better than non-dominant CEOs with regard to post-succession firm performance whether in troubled or non-troubled situations. The results suggest that a heroic portrait of dominant CEOs in troubled situations might have impacted the practice of CEO appointment, but it appears to be a myth lacking a solid empirical basis.