Are Chief Executive Officers (CEOs) more vulnerable when there are more non-local directors on the board after terrorist attacks? As corporate purpose has been shifting from shareholder primacy to all stakeholder interests, it calls for a governance structure that can effectively evaluate multiple stakeholder needs. This study examines how the geographic proximity of directors affects CEO dismissal after terrorist attacks, an exogenous shock that disrupts and complicates stakeholder relationships for CEOs. We argue that local directors can help the board better understand stakeholder needs and evaluate CEO performance after terrorist attacks, whereas non-local directors cannot effectively appreciate the local context for the impact of the event, leading to a higher risk of CEO dismissal after terrorist attacks. We also suggest that the similarity between CEOs and local directors, a form of social proximity, can mitigate the negative effect of non-local directors on CEO dismissal. With a sample of 2,952 firms from S&P1500 in the United States from 2000 to 2022, we find support for our predictions on CEO dismissal after terrorist attacks. This study contributes to the strategic leadership and corporate governance literature by revealing how geographic and social proximity affect leadership vulnerability after a crisis.
