CEOs Face More Accountability When a Board Member Has Military Experience

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.

Market downdrafts tempt people to adjust their investments, but that’s not always a wise choice

If you logged on to your brokerage account today and wish you hadn’t, you’re not alone.

BlackRock Chief Executive Larry Fink said Monday the asset manager hasn’t received this many client calls since March 2020, when the pandemic was beginning.

Retail brokerages including Fidelity Investments had technical glitches Monday morning as traffic surged from people trying to check their portfolios and place trades.

Studies have found that the more people look at their 401(k)s, the lower their long-term returns are likely to be.

The S&P 500 drops on almost half of trading days, so checking your portfolio more often means you are more likely to see losses. And there have been lots of losses since President Trump rolled out a series of tariffs last week.

In just two trading days last week, the average 401(k) lost 7% of its value, according to Alight Solutions , which tracks employer retirement plans. Individual investors moved money out of stock-heavy target-date funds and into the relative safety of bonds and cash.

That’s understandable, but not necessarily wise. Here are some things financial advisers say to keep in mind right now:

Be realistic

Now that the S&P 500 is down almost 20% from its peak, many people are realizing that their risk tolerance isn’t as high as they thought it was when markets were up 20%, said Chelsea Ransom-Cooper, chief financial planning officer at Zenith Wealth Partners in New York.

“It’s a great time to level-set and reflect on what you’re comfortable with,” she said. However, if you decide to make changes, you should tweak a little at a time to avoid making emotional decisions you regret later, she said.

Sell strategically

In general, you should avoid the impulse to sell when the value of your investments falls, said Martin Lowenthal, financial adviser in Needham, Mass.

He has been telling his clients to stay the course and advising that they pull money from alternative sources such as life insurance plans if they need liquidity in the short-term.

“You shouldn’t be drawing from depressed assets if you have other places to go for income,” he said.

However, falling stock prices can create opportunities to save on taxes. If you find yourself with stocks or funds that are worth less than what you paid for them, you may be able to recognize the losses for tax purposes. Selling at a loss and reinvesting the money can help offset taxes on future capital gains while remaining invested in the market.

Buy cautiously

There may be reasons to add to investments, financial advisers say, especially if you have been sitting on cash. Cash losses value to inflation, which is expected to rise as companies digest new tariffs.

With markets starting to price in rate cuts , now might be a good time to lock in returns with fixed-rate products such as certificates of deposits or bonds, Ransom-Cooper said.

If you are younger and have a longer investment horizon, you can consider making small investments into the stock market at regular time intervals to take advantage of a potential rebound while managing risk.

“If you are concerned about inflation, you want to make sure that your money is at least trying to keep up,” she said.

Do nothing

This isn’t the first time the market has tested investors’ stomach for risk, and history says it won’t be the last. There was the financial crisis, then there was the pandemic, and “this time, it’s the tariff tantrum,” Lowenthal said.

“I’ve got full faith in the American economy to ride this out,” he said.