How to Remove a CEO From a Corporation?
Knowing how to remove a CEO from a corporation is a crucial tool for a company's shareholders.3 min read updated on February 01, 2023
Knowing how to remove a CEO from a corporation is a crucial tool for a company's shareholders. The role of CEO is unique within an organization because they don't have a manager to report to. Instead, they need to look after the well-being of three different groups. Investors need to be kept satisfied with profit and results, employees have to be motivated, and, last but not least, the CEO is ultimately responsible for customer satisfaction.
This task of pleasing such a diverse group of people is similar only to what politicians do, and it's largely the reason why CEOs command disproportionately higher salaries than anyone else within their organization.
Their roles are kept in place by contracts, and their salaries are determined by the company's board. However, there are no clear specifications regarding the amount of time a CEO needs to spend at work. While some are hands-on managers, others prefer to delegate responsibilities and only actively participate in the managing process for a few hours every month.
The pressure that comes with this job is enormous, and it is common for CEOs to have severe personal problems because they must often neglect the people around them for the sake of their job.
CEOs and Stockholders
It's not uncommon for one or more stakeholders to get the CEO fired, even in situations where the same person founded the company. That was the case with Steve Jobs, who was pushed out of Apple for a period of time. Company founders are not spared because as companies get bigger, their stock gets diluted, making what was once a majority share shrink below 50%. Companies often outgrow their founders for various reasons, the most common being that they had a very good idea and entrepreneurial mindset, but failed to properly manage and execute afterward.
For these reasons, CEOs and company founders must take precautionary measures and establish close relationships with board members and stockholders. Recognizing the job's volatility and getting written promises by important members of the organization are the keys to longevity in such a demanding position. In any major company, there will be groups of people pushing for a new CEO, but for him or her to be fired, a decision must be made by the company's board, the very same people that share the task of protecting the CEO.
Ways to Remove a CEO
Here are some effective ways to remove an organization's CEO.
- One way to eliminate a CEO is to make them burn out by giving more responsibilities than they can handle. Removing the chairman might do the trick because the chairman often keeps the CEO grounded.
- Another way to destabilize a CEO is to make them feel underqualified for the position and constantly scared of someone else gunning for the role. That leads the CEO to avoid selecting the best people to be on his or her team out of fear that one of them will eventually take the top job. A bad team leads to bad results, and bad results get CEOs fired.
- As the primary defendant of a company's image, the CEO's own image can lead to their downfall. Even the best-trained CEO can be made to look like a fool if the information he or she is getting is inaccurate. Therefore, an efficient way of forcing them out of the job is to create a fake impression of accurate information, leading to bad decisions and the board having to dismiss the CEO.
- A different approach to removing a CEO, especially a very new one, is keeping a former CEO within the organization. Employees will have a natural tendency to report to their old boss, who in turn will undermine the new boss as much as possible. The combination of employees not properly acknowledging the new hierarchy and the old CEO actively sabotaging the new one's role will most often lead to the new one not being able to do a proper job. Dismissal by the board is only a matter of time.
The decision to remove the CEO is the hardest part of the whole process. Once that has been made, the actual firing process is relatively simple and straightforward. The company's main concern afterward should be taking precautionary measures against a potential lawsuit.
If you need help with removing the CEO from a corporation, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.