managers for the proxies of individual investors, with the
intentofgettingtheirnomineesfortheboardelected.They
maynotalwayssucceedatwinningmajorityvotes,butthey
do put managers on notice that they are accountable to
stockholders. There is evidence that proxy contests occur
moreoftenin companiesthatarepoorlyrun,and thatthey
create significant changes in management policy and
improvements in operating performance.
9
Forced CEO Turnover
CEO turnover at most firms is usually a consequence of
retirementordeath,andthesuccessorusuallyfollowsinthe
incumbent’sfootsteps.Thisisnotsurprisingsinceboardsof
directorsareusuallyhandpickedtosupporttheCEO.Insome
cases,though,theCEOisforcedoutbytheboardbecauseof
displeasureover hisorherperformance,andan outsideris
broughtintoheadthefirm.Thisprovidesanopeningfora
reassessmentofthefirm’scurrentmanagementpoliciesand
for significant changes. In the United States, forced CEO
turnoverhasebbedandflowedwithinvestoractivism,rising
inthe1980s,droppingoffinthe1990sandrisingagaininthe
aftermathofthecorporatescandalsatEnronandWorldCom.
While forced CEO turnover was uncommon outside the
UnitedStatesuntilrecentyears,itisbecomingmorefrequent.
Infact,moreCEOswereforciblyremovedinEuropein 2004
than in the United States.
Hostile Acquisitions
Investorpressure,proxycontests,andCEOturnoverrepresent
internal processes for management discipline. When these