Between May and December 2008, Western Digital, one of the largest computer hard disk manufacturers in the world, experienced a severe shock*. Its stock price fell from $37.53 to $11.45. In 2009, the company reported in its proxy statement that it used discretion, as opposed to objective performance metrics, for evaluating its CEO. In 2008, it had not used discretion in the executive’s performance evaluation. Western Digital thus changed how it evaluated its leader after the 2008 shock. This example illustrates the argument of my recent study that shocks have implications for how firms evaluate their CEOs.
Source: LSE Business Review – Economic shocks affect how a CEO is evaluated
