Abstract
Research on boards suggests that the degree of demographic diversity among directors is a primary board feature that influences how directors monitor and advise the CEO. We draw from upper echelon theory to propose that a relatively diverse/homogeneous board may try to reduce post-succession conflicts with an outside CEO by selecting a successor who has prior experience as a director on other relatively diverse/homogeneous boards. Moreover, we posit that such an outside CEO successor is less likely to have conflicts with the board, reducing post-succession CEO and director turnover and improving firm performance. Results based on analyses of 124 outside CEO successions at Fortune 500 companies during 1994 to 2007 provide strong support for our theory. This study takes a first step to examine directors’ efforts to reduce conflicts with a new CEO and identifies a new background of CEOs that has important implications for research on CEO-board relationship, upper echelons theory, and CEO succession.
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