Bearing Bad News

In January the CEO of Bear Sterns was ‘demoted’ from CEO to Chairman of the Board.  Companies can defined these roles however they like, though I don’t think this was a very good idea. I agree with venture capitalist Pascal Levensohn, who said:

Keeping former CEOs on the board of your company is generally contra-indicated for several obvious reasons:

First, most former CEOs have strongly held continuing views and core beliefs as to how the company should continue to be run;

Second, it is emotionally very difficult for former CEOs to let go of such strongly held convictions; and

Third, people have a natural tendency to second-guess other people.

The chairman leads the board; the CEO doesn’t just report to him, the chairman hires or fires the CEO. The chairman is ultimately responsible for what the firm does, and as such this was not a good move on Bear Sterns’s part.