Vocabularies as Toolkits and Cultural Repertoires of CEO Succession

This paper applies culture as toolkit perspective (Swidler, 1986, 2000) to the study of CEO succession in large Japanese firms. Japanese CEO succession is full of irony. CEO succession happens when performance is good. CEO succession happens when performance is bad. CEOs follows tenure rule, or they retire early. All these things happen without vigilant boards, without active stock market, and without dominant stakeholders. These puzzling practices of CEO succession in Japan, however, have unique names. They are hanamichi (flower way), insekijinin (resigning to take responsibility), ninki (tenure rule), and wakagaeri (rejuvenation). Taking these specialized vocabularies as cultural repertoires for action for Japanese CEOs, we have identified the conditions where performance might have differential effects on CEO succession. We hypothesize that good performance will facilitate CEO succession during the tenure milestone period, especially when CEO is retiring as a chairman, while poor performance will lead to CEO succession in other times. We also examined rejuvenation rhetoric by studying the successor age. We hypothesized that poor performance will lower the successor age, while old age of retiring CEO and the earlier than expected CEO change will increase the successor age. We tested these hypotheses on CEO succession events of top 200 firms during the 1955-1995 period. We found that performance had differential effect for timing of CEO change, and also found interesting dynamics between performance and the age of retiring CEO that affected successor age. Our study illustrates the power of applying culture as toolkit perspective in understanding organizational decision making.