Changing Regimes: CEO Succession with Change in Political Ideology and New CEO Early Departure

Abstract

We advance theory on CEO succession by examining the effects of strategic leadership transitions coupled with change in political ideology—i.e., when a conservative CEO is replaced by a liberal, or vice-versa. Drawing on the organizational-disruption theory of succession, we postulate that value-related ideological differences between the new CEO and the predecessor amplify succession-related disruption and increase the likelihood of new CEO early departure. We further conjecture that the effect of shifting CEO ideology on successor’s early departure strengthens when (a) the predecessor remains board chair after succession, (b) the new CEO ideologically misfits the incumbent executive group, and (c) the shift in CEO ideology occurs under conditions of poor pre-succession firm performance and low industry munificence. Survival analyses of 1,699 CEO succession events in S&P 1500 firms support our predictions. Based upon our findings, we offer a mid-range theory on the disruptive nature of shifting CEO ideology in strategic leadership, and highlight a set of parameters that organizations should consider in the CEO succession process.