Permanently Rotate the Winning Team

Reiner Eichenberger () and Bruno S. Frey ()
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Reiner Eichenberger: University of Fribourg
Bruno S. Frey: CREMA

Journal of the Knowledge Economy, 2025, vol. 16, issue 3, No 9, 11198-11213

Abstract: Abstract International business is highly dynamic, diverse, and innovative. In such an environment, the institution of a single CEO exhibits several major drawbacks: The interests and strategies of the CEO and other top managers are often not well aligned, allocating so much power to one person is risky, and the change of a CEO entails large costs due to discontinuities in strategy. The standard alternative to a single CEO is a top management team working collectively. Its decisions tend to be poorly focused and insufficiently implemented as its members often cater more to the interests of their department or service unit than to the success of the whole firm. Based on a comparative economic analysis of the top-managers’ incentives, we argue that a novel governance institution of a rotating chief executive officer is better adapted to international business. Our proposal combines the two traditional systems by regularly rotating the CEO position among the members of a leadership team. The special interests of the various branch managers are checked as they are integrated into pursuing the overall goals of the firm. Rotation contributes to overcoming the specific interests and silo mentality of the various sections and departments in a firm. We discuss how the new institution can be designed, assess its most important advantages and the problems involved, and relate it to other rotating leadership systems in the modern economy, in history and in politics.

Keywords: Corporate governance; Organization; Institutional economics; Political economics; Leadership (search for similar items in EconPapers)
JEL-codes: M12 P12 P16 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s13132-024-02116-3

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