The Rise in CEO Turnover Is a Sign of the Times -- Both Good and Bad
In the first 9 months of 2008 the number of CEOs who left their jobs hit a record high according to Challenger, Gray & Christmas Inc -- 1,132 by October and when the 2008 full year tally is completed the total will be higher than ever before.
What is going on behind these numbers is two forces of change, both of which should improve the caliber of leadership and cause boards to act.
First the economic crisis makes CEOs more vulnerable. Their companies and markets are in crisis, in most cases their stocks are significantly down and they are under pressure from shareholders and employees to improve performance. And when a CEO leaves he usually "resigns" - which is a euphemism for a difficult conversation in which both the board and the CEO agree it would be best for the CEO to step down.
More visibility than that is exceptional - like when the Cadence Design Systems CEO Mike Fister and his top 4 executives all "resigned" on the same day - you know they were summarily fired and there is a cleanup job to be done there - or when Dianne Greene left VMWare openly stating she did not agree. Or when the CEO has clearly been recruited into a new job. But usually it's a civilized, mutual agreement.
In tough times good boards are looking at whether they have the right CEO. The skills needed to grow a company in a rising market are often different skills than operating and preserving a large company in a down market. And in down markets leadership and character is more important than ever.
The second change at work is the unprecedented levels of transparency shareholders now have. This transparency comes from the combination of new executive compensation reporting requirements and the openness of information flow on the web. In 2006 board compensation committees were first required to file a Compensation Discussion and Analysis report - the CD&A - at the beginning of the year describing every single element of compensation the top executives are receiving and the rationale behind it. This means that finally shareholders can see everything, and so have the knowledge to question boards in the shareholder meetings. Carol Bartz's new compensation package at Yahoo is an example of a CEO's pay lining up with shareholder interests and it's all publically filed.
I am hoping that with a spirit of change in Washington, a tough economic environment and the unprecedented level of visibility the CD&A, the web and bloggers provide into what's really happening in a company - that more boards will ask the hard questions about whether they have the right CEO or not. Let's not have a repeat of leaving Jerry Yang in as CEO of Yahoo for 18 months too long, and let's have the GM board hold Rick Wagoner accountable to turn GM around or get out. After all, the most impactful thing a board does is hire and fire the CEO.
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Oops, Traci Fenton's website is called WorldBlu (without the "e" at the end.)
Guys,
Commiserating that corporate boards should do more about CEOs is so fruitless. The only way sonvolt48 and the rest of us will ever make anything close to a CEO salary is when we'll unite and buy the companies that enslave us. And then make them manager-free (disclaimer: I used to be a manager, too.) There are a few prominent examples of manager-less companies: gooogle W.L. Gore and Associates or Semco SA of Brazil. Also, Traci Fenton of WorldBlue has an interesting web site on this. Check those out then get inspired while brainstorming how to do it (or go back commiserating.) Your choice. yahoo.comoo.com
Penny, don’t you think the collective business performance has anything to do with the executive trimmings? It seems like all they do nowadays is sling money around, cook the books with creative financing schemes and compete to be the top earners. Nobody builds for the future. And why are established companies taking loans to make payrolls?
Do they think revenue is just going to magically appear out of the stat sheets? The work force is your sales source that keeps you and your associates in business. And a strong work force needs benefits and a good wage to keep them spending.
They also need schools and safe streets to live and work and shop. And when the corporations coordinate together helping to build and maintain the communities of their workers it builds a stronger Nation. Of course, a strong Nation is in need of talented executive administrators to give direction to the growth of the progress.
Aren’t these the kind of times where the forward thinking entrepreneurs with traditional values unseat the established Icons of Business? A time when a Green Awareness is driving innovation?
It is past time when Boards should re-evaluate what passed for business wisdom in the past. Most of the businesses that bought into the idea that running 'lean and mean' was a key element to keeping profits up have gone belly up. When are they going to wake up and realize that they were sold BS by CEOs who made a bundle while driving these businesses into the ground. And, how stupid for a Board to agree to a compensation package for a CEO without a tie in to job performance. I mean how stupid can you be??
And how stupid to think companies can run with skeleton crews. Business thinking just boggles the mind. I am reminded of the time when it was proved that Ford knew about the problems with their Pinto catching fire. Some calloused, idiot executive decided it was worth the money Ford saved in not recalling those vehicles to allow people to burn to death.
Lean is not best. People who overlap, work 80s a week and have no life outside of work are not top performers. It's time to invest in staff again and reduce CEO compensation. If businesses don't hire workers and pay them decent living wages then there is no one here to buy goods and services and everyone suffers. Trickle up works, trickle down doesn't.
111....
That is one of the most concise, yet eloquent, statements of how this country has been turned upside down for the last forty years.
I just visited paywatch.org and found that it would take me 443 years to make as much as my CEO made last year.
What is wrong with this picture?
What's interesting is while CEOs and other top executives have been touting "lean" as the way to go, they mean "lean" with people and a workforce. These companies have not been, by any means, "lean" with money - as you have said, the money has gone to the executives and now these companies are going belly up.
Gee, I wonder why. A slim workforce means that there is no money out in the general population to actually purchase goods and services.
Like any other profession where peoples lives and safety is is on the line it's obvious you have to investigate errors, mistakes, abuses, and slip ups made by CEO's. And enforce disciplinary action as needed.
Why isn't this standard procedure rather then just riding a never ending cycle of boom and bust?
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