Does experience matter? CEO successions by former CEOs

Purpose - This paper aims to investigate an interesting yet mostly ignored distinction within external CEO successions: outside successors who have previous CEO experience and those who do not. It examines stock market reaction, compensation and firm performance prior and post-succession. Design/methodology/approach - The authors used an event study, Patell Z-statistic and Rank Z-statistic to test cumulative abnormal return before and after the successions. They also used probit and OLS regressions to examine firm performance and CEO compensation prior and post-succession. Findings - The authors find that the stock market reacts positively to the hiring of an outsider who is an exCEO. Compared with firms that hire non-exCEOs, firms that hire exCEOs had higher debt ratios and greater bankruptcy chances pre-succession, but post-succession, these firms still have worse financial performances. Non-exCEOs come from better performing firms than exCEOs. There is no consistently significant difference in compensation between an exCEO and a non-exCEO, though the compensation for both increases significantly from that of the predecessors and that of their previous positions. Research limitations/implications - Future research could focus on the cost-benefit tradeoff of hiring an exCEO. It would be interesting to examine the role of the board of directors in assessing this cost-benefit tradeoff and determining the optimal choice for the firm. An important aspect that has not been sufficiently examined in the literature is the CEO fit. Hiring an exCEO may not always be the right choice for the firm. Another area for future research could examine how the post-succession performance is affected by exCEO tenure in previous CEO position(s) and whether the exCEO worked in several industries or in the same industry. Practical implications - This paper also has implications for the board of directors. There seems to be a negative transfer of human capital when it comes to hiring exCEOs. The human capital theory suggests that job-specific experience positively relates to job performance. According to Hamori and Koyuncu, prior CEO experience may lead to the formation of knowledge corridors and decision-making templates that make it difficult for individuals to take in inconsistent information or take actions that are different from past ones in a changed context. This, in turn, undermines performance . Boards of directors should put more effort into considering inside relay successions and should be cautious when hiring an outsider who has prior CEO experience. A best-of-both-worlds scenario may be for boards to hire exCEOs into top executive positions, such as COO and/or president, so as to give them a chance to be groomed for the top position and familiarize themselves with the firm while still benefiting from their prior CEO experience. Originality/value - There is very little research on the distinction between outside CEOs with previous CEO experience and those with no such experience. This paper tries to shed some light on this important issue in corporate governance in order to explain why boards of directors would hire an outsider with or without previous CEO experience

Analysis of human vergence dynamics

Disparity vergence is commonly viewed as being controlled by at least two mechanisms, an open-loop vergence-specific burst mechanism analogous to the ballistic drive of saccades, and a closed-loop feedback mechanism controlled by the disparity error. We show that human vergence dynamics for disparity jumps of a large textured field have a typical time course consistent with predominant control by the open-loop vergence-specific burst mechanism, although various subgroups of the population show radically different vergence behaviors. Some individuals show markedly slow divergence responses, others slow convergence responses, others slow responses in both vergence directions, implying that the two vergence directions have separate control mechanisms. The faster time courses usually had time-symmetric velocity waveforms implying open-loop burst control, while the slow response usually had time-asymmetric velocity waveforms implying closed-loop feedback control. A further type of behavior in a distinct subpopulation is a compound anomalous divergence response consisting of an initial convergence movement followed by a large corrective divergence movement with time courses implying closed-loop feedback control. The closed-loop response for slow responses to disparity steps exhibited pronounced oscillations in the velocity trace, implying the involvement of a sampled-data system with a rate of about 3 samples/s. This analysis of the variety of human vergence responses thus contributes substantially to the understanding of the oculomotor control mechanisms underlying the generation of vergence movements

A novel approach to oral iron delivery using ferrous sulphate loaded solid lipid nanoparticles

Iron (Fe) loaded solid lipid nanoparticles (SLN’s) were formulated using stearic acid and iron absorp-tion was evaluated in vitro using the cell line Caco-2 with intracellular ferritin formation as a marker ofiron absorption. Iron loading was optimised at 1% Fe (w/w) lipid since an inverse relation was observedbetween initial iron concentration and SLN iron incorporation efficiency. Chitosan (Chi) was included toprepare chitosan coated SLN’s. Particle size analysis revealed a sub-micron size range (300.3 ± 31.75 nmto 495.1 ± 80.42 nm), with chitosan containing particles having the largest dimensions. As expected,chitosan (0.1%, 0.2% and 0.4% w/v) conferred a net positive charge on the particle surface in a concen-tration dependent manner. For iron absorption experiments equal doses of Fe (20 �M) from selectedformulations (SLN-FeA and SLN-Fe-ChiB) were added to Caco-2 cells and intracellular ferritin proteinconcentrations determined. Caco-2 iron absorption from SLN-FeA (583.98 ± 40.83 ng/mg cell protein)and chitosan containing SLN-Fe-ChiB (642.77 ± 29.37 ng/mg cell protein) were 13.42% and 24.9% greaterthan that from ferrous sulphate (FeSO4) reference (514.66 ± 20.43 ng/mg cell protein) (p ≤ 0.05). Wedemonstrate for the first time preparation, characterisation and superior iron absorption in vitro fromSLN’s, suggesting the potential of these formulations as a novel system for oral iron delivery

Seismic Liquefaction Assessment for the JFK Light Rail System Project

A procedure to evaluate seismic liquefaction potential based on ground response analysis and in-situ characteristics of the soil deposits is developed. This procedure uses the correlation between the Standard Penetration Test (SPT) N60 blow-counts, and the shear wave velocities to establish Shear Wave Velocity (SWV) profiles. The SWV profiles along with soil properties from the subswface investigation, and the design earthquake time history are then used to perform seismic response analysis for the stratified soil deposits. Cyclic Stress Ratio (CSR) profiles are determined from maximum earthquake induced shear stress profiles, based on seismic response analysis, and effective overburden pressures. . The CSR profiles are then used to determine SPT N(1)60 blowcounts profiles, normalized to 1 ton/ft2 effective overburden pressures. Correlations between SPT N(1)60 values and peak ground acceleration at sites, which have and have not liquefied in previous earthquakes are used to develop the SPT N(1)60 profiles. These profiles characterize a boundary between potentially liquefiable and non-liquefiable saturated granular soil layers during a design earthquake. Finally, the normalized SPT N(1)60 are corrected for the actual in-situ effective overburden pressures to determine SPT N60 screening profiles. These screening profiles can be directly compared to the SPT N60 blow-counts per foot measured in the subsurface investigation for each individual boring-log to determine the presence of liquefiable and non-liquefiable saturated granular soil layers. This procedure is used to evaluate the seismic liquefaction potential at the John F. Kennedy (JFK) International Airport Light Rail System (LRS) project. Separate liquefaction analysis for each of the four sections of the project was performed. The average ground surface, ground water level elevations and soil profiles for these areas were determined based on the borings from the subsurface investigation. The drilling and sampling results were conducted to obtain (SPT) N60 values corresponding to a sampling hammer energy equivalent to 60% of that of a free fall. In the early stages of the investigation, each driller and drill rig was calibrated so that N60 values could be determined. To evaluate the procedure, comparisons with seismic liquefaction assessment based on Cone Penetrometer Tests (CPT’s) were performed and compared to that of the SPT’s. Also comparisons between the shear wave velocities predicted from the SPT N60 values, from the subsurface investigation program, and the in-situ shear wave velocities measured during Crosshole Seismic Testing are presented. These comparisons validate the Seismic Liquefaction Assessment procedure based on SPT’s

Consequences of traumatic brain injury for human vergence dynamics

Purpose: Traumatic brain injury involving loss of consciousness has focal effects in the human brainstem, suggesting that it may have particular consequences for eye movement control. This hypothesis was investigated by measurements of vergence eye movement parameters. Methods: Disparity vergence eye movements were measured for a population of 123 normally sighted individuals, 26 of whom had suffered diffuse traumatic brain injury (dTBI) in the past, while the remainder served as controls. Vergence tracking responses were measured to sinusoidal disparity modulation of a random-dot field. Disparity vergence step responses were characterized in terms of their dynamic parameters separately for the convergence and divergence directions. Results: The control group showed notable differences between convergence and divergence dynamics. The dTBI group showed significantly abnormal vergence behavior on many of the dynamic parameters. Conclusion: The results support the hypothesis that occult injury to the oculomotor control system is a common residual outcome of dTBI

What happens to CEO compensation following turnover and succession?

NOTICE: this is the author’s version of a work that was accepted for publication in the Quarterly Review of Economics and Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in the Quarterly Review of Economics and Finance 49 (2), 2009 and is available here.When boards hire CEOs, the board and successor CEO have an opportunity to redesign the predecessor's compensation contract. The CEO's relative bargaining power will influence the outcome of compensation negotiations. Analyzing 508 successions, we find that total compensation of successor CEOs increases by 69% over their predecessor, but the structure of successor compensation is heavily influenced by the predecessors’ contracts. When the board's bargaining power is large, successors have a greater proportion of pay-at-risk and smaller proportion of salary. When the CEO's bargaining power is large, there is a smaller proportion of pay-at-risk and relatively greater proportion of salary

Does experience matter? CEO successions by former CEOs

The article available for download is a post print. The definitive version is published in Managerial Finance. It is available here. Copyright (2012) Emerald Group Publishing Limited.Purpose - This paper aims to investigate an interesting yet mostly ignored distinction within external CEO successions: outside successors who have previous CEO experience and those who do not. It examines stock market reaction, compensation and firm performance prior and post-succession. Design/methodology/approach - The authors used an event study, "Patell Z-statistic" and "Rank Z-statistic" to test cumulative abnormal return before and after the successions. They also used probit and OLS regressions to examine firm performance and CEO compensation prior and post-succession. Findings - The authors find that the stock market reacts positively to the hiring of an outsider who is an exCEO. Compared with firms that hire non-exCEOs, firms that hire exCEOs had higher debt ratios and greater bankruptcy chances pre-succession, but post-succession, these firms still have worse financial performances. Non-exCEOs come from better performing firms than exCEOs. There is no consistently significant difference in compensation between an exCEO and a non-exCEO, though the compensation for both increases significantly from that of the predecessors and that of their previous positions. Research limitations/implications - Future research could focus on the cost-benefit tradeoff of hiring an exCEO. It would be interesting to examine the role of the board of directors in assessing this cost-benefit tradeoff and determining the optimal choice for the firm. An important aspect that has not been sufficiently examined in the literature is the CEO fit. Hiring an exCEO may not always be the right choice for the firm. Another area for future research could examine how the post-succession performance is affected by exCEO tenure in previous CEO position(s) and whether the exCEO worked in several industries or in the same industry. Practical implications - This paper also has implications for the board of directors. There seems to be a negative transfer of human capital when it comes to hiring exCEOs. The human capital theory suggests that job-specific experience positively relates to job performance. According to Hamori and Koyuncu, prior CEO experience may "lead to the formation of knowledge corridors and decision-making templates that make it difficult for individuals to take in inconsistent information or take actions that are different from past ones in a changed context. This, in turn, undermines performance". Boards of directors should put more effort into considering inside relay successions and should be cautious when hiring an outsider who has prior CEO experience. A best-of-both-worlds scenario may be for boards to hire exCEOs into top executive positions, such as COO and/or president, so as to give them a chance to be groomed for the top position and familiarize themselves with the firm while still benefiting from their prior CEO experience. Originality/value - There is very little research on the distinction between outside CEOs with previous CEO experience and those with no such experience. This paper tries to shed some light on this important issue in corporate governance in order to explain why boards of directors would hire an outsider with or without previous CEO experience

CEO Compensation Structure following Succession: Evidence of Optimal Incentives with Career Concerns

NOTICE: this is the author’s version of a work that was accepted for publication in the Quarterly Review of Economics and Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in the Quarterly Review of Economics and Finance 49 (4), 2009 and is available here.To motivate managers to pursue shareholder interests, boards may design management compensation packages to reward managers for good firm performance. However, note that when CEOs are far from retirement, they have career concerns. In these cases, Gibbons and Murphy argue that it may not be optimal for their current compensation to be too dependent on firm performance. Testing this proposition, we find that abnormal returns are negatively related to the percentage of performance-based pay of newly hired CEOs when companies announce CEO successions. Since these newly hired CEOs are likely some distance from retirement, we interpret these results as being consistent with Gibbons and Murphy; it may be better to allow newly hired CEOs to be paid in human capital increases from the managerial labor market than to have their current pay too closely related to performance