Chief executive officers face pressures to perform in a short time or be shown the door. In large multinational corporations, CEOs are not protected by the iron rice bowl.

HELMING an organisation is a high stakes game. Failing to perform or falling out with the Board often leads to surprising endings. Particularly in North America, chief executive officers, CEOs, who have been ousted, find themselves scrutinised, and scandalised by the media. With rampant populist anger over CEO pay and pressure from shareholders, it is no wonder that CEOs are fired with much fanfare.

The firing of Carol Bartz as CEO of Yahoo! Inc has all the drama of a troubled romance that ended with a phone call breakup. Bartz confirmed her own firing to the employees of Yahoo via a memo sent from her iPad. The infamous two-sentence memo read: “To all, I am very sad to tell you that I’ve just been fired over the phone by Yahoo’s chairman of the Board. It has been my pleasure to
 work with all of you and I wish you only the best going forward.” She later told Fortune magazine that Roy Bostock, Yahoo’s chairman, called her cellphone to read a lawyer’s prepared statement for dismissing her. The gutsy Bartz didn’t argue and retorted that she got the message.

Bartz, who had more than one year left on her four-year contract with Yahoo, joined the company in 2009 based on good performance at software firm Autodesk with hopes to engineer a turnaround. Despite her success at cutting cost and generating high Internet traffic, the board had decided that her overall performance was rocky with a lack of strategic vision and she had failed to fulfil the promise of a turnaround.

The downfall of Bartz resulted from the pummelling from investors, business analysts, and bloggers. However, the firing of Bartz hasn’t taken Yahoo to new heights. The company is still searching for a new CEO as its chief financial officer Tim Morse holds the helm as interim CEO. One wonders if the
 board’s decision was too hasty and if Bartz should have been given her full term to produce some kind of turnaround. But this is the reality—the long-term chief executive officer is becoming a rare sight in boardrooms.

The need for change at the top is a common reason or excuse to get the boss fired. In the case of Hewlett-Packard, HP, the company’s board said they needed a change at the top, and they sent CEO Leo Apotheker packing after just 11 months on the job. The board came to the decision after it had cut back on its financial outlook for the past three quarters of 2011 and felt it was not confident to meet its sales targets for the fourth quarter.

Apotheker’s dismissal was less fiery but full of drama. It was reported that members of HP’s board leaked news of ousting Apotheker to the media a day before an official announcement was made. Apotheker himself was unaware that his leadership was under fire until news of his sacking broke. He left without resistance, and wrote a letter to employees expressing his confidence in HP’s future and new CEO Meg Whitman’s strategic vision.

HP’s hasty board decisions have caused the company over US$83 million in severance pay, including over US$25 million that Apotheker walks away with. A year earlier, they fired Mark Hurd for submitting false expense reports to apparently cover up a relationship with a former employee. In 2006, Pattie Dunn, HP’s chairperson was sacked after she was found to have spearheaded a secret probe to spy on board members and journalists, in an attempt to find the source of board-level media leaks. A year earlier, in 2005, then CEO Carly Fiorina stepped down involuntarily after spearheading HP’s failed merger with Compaq.

The actions and events make one wonder if the quick change of hands at the helm can effectively lead a company back on its tracks. Each CEO is likely to bring with him or her a particular strategic vision and aligning it with the company and the board’s vision may take time. As the saying goes “two wrongs don’t make a right”. Firing Hurd and hastily appointing Apotheker, who was deemed as a curious choice after his lacklustre tenure at software firm SAP, is an indication of the kind of disastrous consequences a revolving-door CEO culture can bring.

Some CEO departures are questionable. Are they dismissals or genuine stepping down as suggested by official statements? Advanced Micro Devices, AMD, was emerging from troubled times and started to show signs of stability when Dirk Meyer’s sudden resignation as CEO after two and a half years caught the industry offguard. Meyer took the helm of AMD at a difficult time when the company was struggling with debt from its US$5.6 billion acquisition of graphics firm ATI Technologies. He charted AMD out of murky waters. His biggest challenge was to spin off AMD’s chip-making foundries that helped the company cut costs and remain competitive against its biggest rival Intel.

AMD’s board felt that a change in leadership will help the company accelerate its growth through its next phase where they focus on chips for smartphones and tablet computers. After Meyer’s departure in January 2011, AMD was left aimless as they searched for a replacement. It was reported that AMD courted some of the industry’s biggest names but were flatly rejected. AMD tried to poach Tim Cook, the man who replaced Steve Jobs at Apple Inc, and Pat Gelsinger, one of Intel’s highest profile executives. Gelsinger would have been a curious choice given the conflict of interest arising from Intel’s antitrust violations against AMD, and he was reported to have rejected the offer twice.

The challenge to find a replacement CEO is compounded by the fact that a previous CEO was pushed out by the board. Potentials will be wondering how much autonomy they have if they take up the offer. A recent study by professor Luke Taylor of the Wharton School of the University of Pennsylvania suggests that boards consider factors beyond immediate costs such as severance packages when deciding to fire the CEO.

The termination costs come in the form of intangible and immeasurable factors such as the time to learn about a CEO’s ability and any damage of relationship he or she has with other board members or shareholders. Taylor argues that a high rate of firings could potentially lead talented individuals to take on career paths which may not lead to a CEO position. Research has shown that there is a huge impact on an axed CEO’s career. When dismissed CEOs go on to manage another firm, the new firm may be 90 per cent smaller and the CEO is paid significantly less. Aggressive boards may inevitably send signals to new CEOs to avoid taking risks and be conservative, a situation which could undermine an organisation’s performance over the long term.

According to Taylor, there are two intangible costs of firing a CEO. First, there is a personal cost—in terms of the time and stress of making a management change—to board members who terminate the company leader. This personal cost may include the loss of a business ally or golfing friend as the CEO goes. Another factor is that the board does not truly care about maximising shareholder value, in which case they would let go of a CEO whom they are not comfortable with rather than whether he is underperforming.

As the board checks on the CEO, who checks on the board? In another words, who fires an incompetent board member? The on-going saga surrounding Japanese optics and imaging firm Olympus Corporation and its axed CEO, Michael Woodford, beg such questions to be asked. As a rising star at Olympus, the British national stunned his peers by raising to the top as the company’s first non-Japanese CEO. Two weeks after his appointment, he was sacked. Like many ousted CEOs, he suffered the indignation of losing his corporate support network with immediate effect—his corporate credit cards were snipped and he was told to take the bus. The reason for his termination was failure to understand the company’s management style and Japanese culture. The clash of cultures is a common reason for conflicts and departure when the eastern values are sometimes at odds with those of the west.

The saga runs deeper. Woodford had commissioned a finding and confronted the Japanese chairman, Tsuyoshi Kikukawa, over US$1 billion in questionable payouts and acquisitions made during the latter’s tenure. As events unfold and fraud investigations began, the company made revelations that it had falsified financial statements for two decades to hide over US$1 billion in losses. What was stunning is that it took a foreign CEO to take a second look at the accounting to uncover what had been going on.