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.

For many Australians, the 2026 Federal Budget initially felt like a direct challenge to the way wealth is created, held and transferred between generations.

The headlines were immediate: changes to capital gains tax, reforms to discretionary trusts, restrictions on negative gearing and increased scrutiny of investment structures. Unsurprisingly, affluent families, business owners and investors began asking the same question:

Is the way we hold our wealth still fit for purpose?

In recent days, the government has announced several significant amendments following industry consultation and public feedback, including exempting testamentary trusts from the proposed 30 per cent minimum tax and expanding capital gains tax concessions for small businesses.

The backdown is welcome. But it also highlights something much bigger.

This Budget has accelerated a conversation that many Australian families have been postponing for years.

The conversation is not really about tax. It is about wealth stewardship.

For decades, Australians have built wealth through businesses, property, investments and careful long-term planning. Yet many families have not revisited the legal structures surrounding those assets in years, sometimes decades.

We often see clients who have spent years building significant wealth, only to discover their legal arrangements no longer reflect their current circumstances.

Their children are now adults. They may own multiple properties.

They may have sold a business, entered a second marriage, become grandparents or accumulated digital assets that did not exist when their original estate plans were prepared.

The trust that distributes income may need to be reconsidered. The bucket company may no longer be so attractive.

The Budget has simply exposed a reality that already existed: wealth structures cannot remain static while life continues to evolve.

Importantly, trusts themselves are not the issue.

Trusts are legitimate planning tools that provide flexibility, protection and continuity. When used appropriately, they allow families to adapt to changing circumstances over time.

And neither is tax the issue, really. Getting the fundamentals right is more important for long-term, sustainable wealth than a few favourable tax treatments around the edges.

The real issue is complacency.

Too often, families create structures and assume the job is done. It isn’t.

Estate planning is no longer a document you sign once and file away in a drawer. It is an ongoing process that should evolve alongside your life.

We are also seeing a broader shift in how Australians define wealth itself. It is no longer just the family home and an investment portfolio.

Modern wealth includes businesses, digital assets, cryptocurrency, intellectual property, frequent flyer points and increasingly complex family arrangements.

At the same time, Australians are living longer than ever before, meaning wealth may need to support multiple generations simultaneously. This creates new responsibilities and new risks.

How do you help your children enter the property market without exposing family wealth to relationship breakdowns?

How do you structure wealth so that it remains a source of opportunity rather than future conflict?

These are the questions families should be asking now.

The recent debate surrounding testamentary trusts also serves as an important reminder that policy decisions can have unintended consequences for vulnerable Australians. It is encouraging that the government has listened to feedback and clarified its position.

But the lesson remains: the wealth landscape is changing.

Increasingly, governments, regulators and tax authorities are paying closer attention to how wealth is held and transferred. That means families cannot afford to adopt a “set-and-forget” approach to their structures.

The families who will be best placed for the future are not necessarily those with the greatest wealth.

They are the families with the greatest clarity. Clarity around ownership, succession and governance. And clarity around how wealth will transition from one generation to the next.

Ultimately, preserving wealth is not about avoiding change.

It is about preparing for it.

Because the greatest risk is not change itself.

It is losing the ability to respond to it.

Anthony Hunt is Co-Founder of Wealth Lawyers and former COO of Westpac Private Bank. He advises business owners, investors and affluent Australian families on wealth protection, succession planning and intergenerational wealth transfer

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.

Shape up or ship out

Does tenure matter?

The Federal Budget may have softened some of its proposed tax reforms, but it has exposed a bigger issue: too many families are relying on wealth structures that no longer reflect the realities of modern life.