Nothing, not even a good CEO, lasts forever.
Fortune 500 companies have had a bad year, and top executives are paying the price: CEOs are leaving in droves. However, as the global economy approaches a potential recession, a new troubling pattern emerges: in many cases, there is no succession plan.
What’s going on: High-profile executive departures at Disney, Starbucks, Salesforce, Vodafone, Slack, AMC, Kohl’s, Bed Bath & Beyond, FedEx, and other companies this year have resulted in the so-called “great CEO reshuffle of 2022.”
The exits follow sharp drops in the share prices of Fortune 500 companies. The S& P 500 is down nearly 18% year to date.
CEO exits slowed in the third quarter, but the C-suite door appears to be revolving again, with a slew of Fortune 500 CEOs departing this month. According to Chris Bingham, a strategy and entrepreneurship professor at the University of North Carolina at Chapel Hill, the cult of personality surrounding CEOs has grown significantly in recent years. Their visions have become inextricably linked to the company’s trajectory.
Succession planning is extremely difficult for CEOs who believe they are irreplaceable, and it simply does not occur, at least not to the extent it should.
This surprises investors and the fear of the unknown can overshadow solid sales and revenue growth. Consider Salesforce: the resignation of co-CEO Bret Taylor last week sent shares down, surpassing a 14% increase in sales in the company’s third-quarter earnings report.
Looking back: Recycling an old CEO is one way to avoid the succession problem. Disney recently reinstated long-time CEO Bob Iger, and Starbucks did the same earlier this year.
Fighting strong economic headwinds with proven leaders makes sense. Iger has been the CEO of Disney for 15 years, so he has a wealth of institutional knowledge. However, Bingham believes that the reinstatement shows that boardroom executives believe the best way forward is backward.