CEOs Face More Accountability When a Board Member Has Military Experience
New study finds that CEOs are more likely to be fired for company underperformance if a director has served in the military.
2 min
Chief executives at poorly performing companies are more likely to be fired if at least one of the company’s board members has a military background.
The odds of dismissal for underperformance are even higher if multiple directors on the board have served in the military, according to a recently published study.
The researchers behind the study analyzed 865 publicly listed companies in the U.S. between 2010 and 2020, identifying companies with board members who had served in either the U.S. Army, Navy, Marine Corps, Air Force, National Guard or a foreign equivalent. A little more than a quarter of the companies in the sample had such a board member.
The researchers then measured company performance by looking at return on assets, a metric often used to determine how efficiently organizations are using their assets to generate profits.
Shape up or ship out
Across the entire sample, about 2.1% of CEOs were fired when their company was underperforming its peers—that is, its return on assets was two standard deviations from the industry mean. Having a military director on the board raised the dismissal probability to 2.9% compared with companies that had no directors with military experience, two directors increased it to 3.9% and three directors amplified it to 5.2%, the researchers found.
“When firm performance falls below the 20th percentile in an industry, the influence of military directors on CEO dismissal becomes noticeable,” says Stevo Pavicevic , an associate professor at Frankfurt School of Finance and Management in Germany and one of the study’s authors.
To better understand their findings, the researchers interviewed 20 corporate directors with military backgrounds. In the interviews, the researchers found that these board members often place a high premium on personal accountability. “It’s part of the discipline we grew up with in the military,” said one of the directors they interviewed.
The interviews suggest this focus on personal accountability translates into concrete action, such as being more inclined to conduct formal CEO evaluations and blame company-performance shortfalls on the CEO. “It seems that directors with military backgrounds have a different approach to accountability,” says Pavicevic.
Does tenure matter?
In another part of the paper, the researchers explored whether their initial findings would hold up if a CEO were entrenched in the company, meaning the executive had a long tenure, held a lot of stock or also served as board chairman.
They found that CEOs were still more likely to be dismissed for poor performance even when they had long tenures or held a lot of stock when a member of the board had a military background. However, in cases where the CEO was also chairman, the relationship disappeared. Those CEOs weren’t more likely to be dismissed if a member of the board had military experience.
“Being both the CEO and chairman of the board gives the executive a very powerful position and even with the presence of military directors on the board, dismissals won’t be that easy,” says Pavicevic.
Copyright 2020, Dow Jones & Company, Inc. All Rights Reserved Worldwide. LEARN MORE
Records keep falling in 2025 as harbourfront, beachfront and blue-chip estates crowd the top of the market.
A divide has opened in the tech job market between those with artificial-intelligence skills and everyone else.
JPMorgan Chase has a ‘strong bias’ against adding staff, while Walmart is keeping its head count flat. Major employers are in a new, ultra lean era.
3 min
It’s the corporate gamble of the moment: Can you run a company, increasing sales and juicing profits, without adding people?
American employers are increasingly making the calculation that they can keep the size of their teams flat—or shrink through layoffs—without harming their businesses.
Part of that thinking is the belief that artificial intelligence will be used to pick up some of the slack and automate more processes. Companies are also hesitant to make any moves in an economy many still describe as uncertain.
JPMorgan Chase’s chief financial officer told investors recently that the bank now has a “very strong bias against having the reflective response” to hire more people for any given need. Aerospace and defense company RTX boasted last week that its sales rose even without adding employees.
Goldman Sachs , meanwhile, sent a memo to staffers this month saying the firm “will constrain head count growth through the end of the year” and reduce roles that could be more efficient with AI. Walmart , the nation’s largest private employer, also said it plans to keep its head count roughly flat over the next three years, even as its sales grow.
“If people are getting more productive, you don’t need to hire more people,” Brian Chesky , Airbnb’s chief executive, said in an interview. “I see a lot of companies pre-emptively holding the line, forecasting and hoping that they can have smaller workforces.”
Airbnb employs around 7,000 people, and Chesky says he doesn’t expect that number to grow much over the next year. With the help of AI, he said he hopes that “the team we already have can get considerably more work done.”
Many companies seem intent on embracing a new, ultralean model of staffing, one where more roles are kept unfilled and hiring is treated as a last resort. At Intuit , every time a job comes open, managers are pushed to justify why they need to backfill it, said Sandeep Aujla , the company’s chief financial officer. The new rigor around hiring helps combat corporate bloat.
“That typical behavior that settles in—and we’re all guilty of it—is, historically, if someone leaves, if Jane Doe leaves, I’ve got to backfill Jane,” Aujla said in an interview. Now, when someone quits, the company asks: “Is there an opportunity for us to rethink how we staff?”
Intuit has chosen not to replace certain roles in its finance, legal and customer-support functions, he said. In its last fiscal year, the company’s revenue rose 16% even as its head count stayed flat, and it is planning only modest hiring in the current year.
The desire to avoid hiring or filling jobs reflects a growing push among executives to see a return on their AI spending. On earnings calls, mentions of ROI and AI investments are increasing, according to an analysis by AlphaSense, reflecting heightened interest from analysts and investors that companies make good on the millions they are pouring into AI.
Many executives hope that software coding assistants and armies of digital agents will keep improving—even if the current results still at times leave something to be desired.
The widespread caution in hiring now is frustrating job seekers and leading many employees within organizations to feel stuck in place, unable to ascend or take on new roles, workers and bosses say.
Inside many large companies, HR chiefs also say it is becoming increasingly difficult to predict just how many employees will be needed as technology takes on more of the work.
Some employers seem to think that fewer employees will actually improve operations.
Meta Platforms this past week said it is cutting 600 jobs in its AI division, a move some leaders hailed as a way to cut down on bureaucracy.
“By reducing the size of our team, fewer conversations will be required to make a decision, and each person will be more load-bearing and have more scope and impact,” Alexandr Wang , Meta’s chief AI officer, wrote in a memo to staff seen by The Wall Street Journal.
Though layoffs haven’t been widespread through the economy, some companies are making cuts. Target on Thursday said it would cut about 1,000 corporate employees, and close another 800 open positions, totaling around 8% of its corporate workforce. Michael Fiddelke , Target’s incoming CEO, said in a memo sent to staff that too “many layers and overlapping work have slowed decisions, making it harder to bring ideas to life.”
A range of other employers, from the electric-truck maker Rivian to cable and broadband provider Charter Communications , have announced their own staff cuts in recent weeks, too.
Operating with fewer people can still pose risks for companies by straining existing staffers or hurting efforts to develop future leaders, executives and economists say. “It’s a bit of a double-edged sword,” said Matthew Martin , senior U.S. economist at Oxford Economics. “You want to keep your head count costs down now—but you also have to have an eye on the future.”
On October 2, acclaimed chef Dan Arnold will host an exclusive evening, unveiling a Michelin-inspired menu in a rare masterclass of food, storytelling and flavour.
From Italy’s $93,000-a-night villas to a $20,000 Bowral château, a new global ranking showcases the priciest Airbnbs available in 2026.
