Placeholder CEOs

Abstract

This paper examines the role of placeholder CEOs, non-family executives serving between two family CEOs. Renowned family firms such as Toyota, Zara, H&M, Hermes, Berings Bank, and Ford, have appointed placeholder CEOs. Our analysis of Japanese firms from 1949 to 2015 reveals that placeholder CEOs account for about 28% of all professional CEO appointments, with a notable one in ten family firms opting for their appointment. Placeholder CEOs exhibit distinctive characteristics, such as older age, better education, and longer CEO tenures of 4.5 years when compared to the conventional professional CEOs. They maintain performance levels similar to their predecessor family CEOs, while professional CEOs improve firm performance. This study highlights the critical role of placeholder CEOs in helping founding families maintain control during transitional periods when family heirs are not ready for leadership.