CO-WORKER COMPLEMENTARITY AND THE STABILITY OF TOP MANAGEMENT TEAMS

by Rachel M. Hayes, Paul Oyer, and Scott Schaefer

Journal of Law, Economics, & Organization, 22, Spring 2006, 184-212.

ABSTRACT

We analyze changes in the composition of top management teams when a key member of the team (the CEO) departs. We find that the probability of non-CEO top manager turnover increases markedly around times of CEO turnover. Further, this increase in non-CEO turnover around times of CEO turnover depends on relations between the tenure of the manager and the tenures of the departing and incoming CEOs. Departure of a long-tenured CEO increases the marginal effect of manager tenure on the CEO/manager turnover association. Succession of a long-tenured CEO decreases the marginal effect of manager tenure on the CEO/manager turnover association. We argue that these findings are at least partially the result of complementarities across these groups of co-workers that affect the value of employment relationships between senior executives and firms.