An examination of CEO power with board vigilance as a catalyst for firm growth in South Africa

Purpose The recent collapse of the corporate giant Steinhoff in South Africa (SA) has highlighted the risks of a dominant Chief Executive Officer (CEO) and an ineffective governing board. For this reason, the purpose of this paper is to scrutinize the influence of CEO power attributes and independent governing boards on the growth of a Johannesburg stock exchange-listed firm. Design/methodology/approach The purpose of this paper is to answer the research question “Under the monitoring role of the board, what CEO attributes, theoretically and in practice preeminent successful firm growth strategies?” This question was answered by examining 130 companies over six years using the econometric methodology of generalized least squares and ordinary least squares with the specific inclusion of generalized method of moments estimation due to its efficiency in controlling for unobserved heterogeneity, endogeneity, autocorrelation, heteroscedasticity, amongst others. The proxies for CEO power are CEO tenure, turnover and professional skills as well as the explanatory variable of board vigilance. The response variable was firm growth. Findings This study found that CEO tenure is negatively correlated with firm growth indicating that long-tenured CEOs may stagnate the firm's growth. Furthermore, CEO turnover was positively correlated with firm growth indicating that a new CEO may bring innovative strategies that link to this study's finding on CEO tenure. The membership of CEOs to accounting professional bodies and board vigilance are also positively correlated to firm growth. Practical implications SA firms' growth policy does not solely depend on the neoclassical fundamental determinants of profitability, net worth, and cash flows. Since the value relevance of assessing CEO attributes as well as board vigilance in the SA market has proved to be very significant and will contribute to future decision making on growth strategies. This study innovatively illustrates the different drivers of firm growth, which is distinct from the normal macroeconomic indicators. The practical contribution of the study lies in the fact that organizations now discern which CEO attributes contribute to sustainability and profitability. Social implications The current depressed economic environment has several negative implications for the citizens of SA. The rising unemployment levels and inflation has deteriorated living conditions. For the economy to recover, SA needs its listed companie