Crowd-sourced CEO approval and turnover

Abstract

This study examines how employee approval ratings of CEOs improve the predictability of turnover. Using the crowd-sourced reviews from Glassdoor, we find that CEOs with high employee approval are less likely to be removed, even after a poor performance. The decrease in turnover-performance sensitivity is particularly strong when the relative importance of employees is greater in industries of higher intangible asset intensity and in states with strong employee protection. Firms with higher CEO approval subsequently show improved performance and lowered firm-specific risk. We highlight the role of employees as a key stakeholder in predicting CEO turnover, consistent with the value creation view of stakeholder capitalism.