Searching for a Corporate Savior: The Irrational Quest for Charismatic CEOs ( Princeton University Press, October 2002)
In this book, I argue that the external CEO labor market was born in a burst of rhetoric about wresting control of corporations away from a group of self-interested insiders, as senior managers in the era of managerial capitalism had come to be portrayed. The rationale for expanding CEO search beyond the confines of the internal labor market was that it would open the CEO position to a broader group of individuals who brought greater talents and breadth of vision than could be found within any one company, and who had little vested interest in the status quo. The external CEO market thus expropriated the principles of the market and the logic of competition. It proposed to take a closed system and crack it open.
Based on evidence presented in the book, I argue, however, the external CEO succession process, as it currently operates, is anything but an open, competitive system. While todays CEO labor market is defended as if it were a market in the classical sense, it is, in reality, nothing of the sort. Far from being the institution-free mechanism portrayed by economists and even some sociologists, the external CEO search process is governed at every stage by structural rules and institutions previously thought to be confined to the firm. In the process as it actually unfolds in one large firm after another, external institutions such as socially-based categories of eligibility, the evaluations of investors and the media, and outside intermediaries (i.e., executive search firms) play a central role in controlling access to jobs and facilitating or hindering mobility.
Because the external CEO market deviates in critical ways from the kinds of markets described by classical economics, its outcomes cannot be assumed to optimal and efficientas, indeed, they turn out not to be when examined critically. To take just one example, as a result of the workings of the external institutions governing the external CEO selection process, many individuals who could be CEOs are not even on the radar screens of those who could be tapping them for the position. Thus the external CEO search process has created a permanently closed ecosystem of top-tier executives for whom what looks like a glass ceiling from below is, viewed from above, perfectly opaque, since it hides those on the lower floors from the view of directors and search firms. This is not only a waste of talent but also, as it turns out, a recipe for returning corporations to the kind of oligarchic control from which external CEO search was supposed to deliver them.