Personal Costs of Executive Turnovers
Forced CEO turnovers lead to a 40% drop in personal income.
1Impact of CEO Turnovers
According to official records from the Danish Tax Authority, forced CEO turnovers result in significant declines in personal income. Over a five-year period, incomes drop by an average of 40%. This decline is primarily driven by labor market outcomes. While salaries and entrepreneurial incomes decrease, other sources of income see an increase.
2Role of Performance
Income declines are more pronounced for CEOs with poor performance during their tenures. This finding supports the idea that the executive labor market is the main channel for income loss. CEOs with low performance are less favored in the labor market, which negatively impacts their income.
3Changes in Income Sources
Following forced CEO turnovers, CEOs' income sources undergo significant changes. While salaries and entrepreneurial incomes decrease, investment incomes and other passive incomes increase. This reflects CEOs' efforts to diversify their income. However, these efforts do not fully compensate for the loss in salary.
4Effects on the Labor Market
Forced CEO turnovers cause significant fluctuations in the labor market. CEOs face longer job search periods and are forced to accept lower-paying positions. This is particularly evident for CEOs with poor performance. These negative effects in the labor market further exacerbate income loss.
5The Danish Example
CEO turnovers in Denmark provide an important case study for understanding the personal costs of forced turnovers. Detailed income data from the Danish Tax Authority clearly show the declines in CEOs' incomes. These data offer valuable insights into the long-term effects of forced turnovers.
6Decline in Entrepreneurial Income
Following forced CEO turnovers, CEOs' entrepreneurial incomes see significant declines. This indicates that CEOs are less successful in starting new businesses or expanding existing ones. The decline in entrepreneurial income is a major factor negatively affecting CEOs' overall income.
7Executive Labor Market
The executive labor market plays a critical role in understanding the effects of forced CEO turnovers. This market directly influences CEOs' job search processes and salaries. CEOs with low performance are less favored in this market, increasing income loss. The dynamics of the executive labor market are a key factor determining CEOs' personal costs.
8Findings and Importance
This study clearly highlights the personal costs of forced CEO turnovers. The 40% drop in CEOs' incomes demonstrates the long-term effects of these turnovers. CEOs with poor performance are more affected by this process. These findings provide important contributions to understanding the dynamics of the executive labor market.
Original article: Journal of Finance — CEO Değişimlerinin Kişisel Maliyetleri