An examination of CEO power with board vigilance as a catalyst for firm growth in South Africa

What is it about?

This research contributes to the industry in providing new and potentially useful insights into the value of corporate governance and CEO behavioural factors in the growth strategy of a firm. All CEOs accrue structural power by virtue of their position in the hierarchy structure of the company. However, CEO's in JSE listed companies gain additional power through their affiliations with a professional body (prestige power) and experience (expert power) which is disclosed in annual reports and in the media. This study can assist firms struggling with low growth prospects but reluctant to recognise that the problem may be with the highest authority of the company namely the CEO. A change in CEO (CEO turnover) is shown to have a positive relationship with firm growth. This finding is also evidenced in the fact that CEO tenure is negatively associated with firm growth due to their entrenchment value and declines in the CEO's performance and innovation from a commitment to old strategies. However, hiring CEOs that are members of a professional body can also aid growth prospects due to CEOs having to adhere to CPD requirements that encourage innovative strategies. Furthermore, these professional bodies are bound to act ethically or face disciplinary action which may discourage managerial opportunism. This study found that the governing board should comprise of directors that are autonomous of the management so that CEOs' decision-making can be effectively monitored and controlled as theorised by the agency theory.

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