Dominant CEO, Deviant Strategy, and Extreme Performance: The Moderating Role of a Powerful Board

Abstract

abstract This study examines the effect of dominant CEOs – defined as CEOs who are very powerful relative to other executives in their top management teams – on firm strategy and performance. Based on a sample of 51 publicly traded, single‐business firms from the US computer industry for the period 1997–2003, our results suggest that firms with dominant CEOs tend to have a strategy deviant from the industry central tendency and thus extreme performance – either big wins or big losses. Further, powerful boards weaken the tendency of dominant CEOs towards extremeness and, more important, improve the likelihood of dominant CEOs having big wins versus big losses. This study reconciles the pessimistic and heroic views regarding dominant CEOs, and suggests that the notion of power balance should be considered in a broader context.