The Angst of Endangered CEOs: ‘How Much Time Do I Have?’
The Angst of Endangered CEOs: ‘How Much Time Do I Have?’
Investor impatience and new technologies and rival upstarts have made the top job tougher and more precarious
By Vanessa Fuhrmans and Joann S. Lublin Updated July 5, 2017 10:50 a.m. ET
The bosses of America’s biggest and best-known companies are learning a common lesson this year: The pay is great, but job security has rarely been shakier.
In June alone, the chief executives of General Electric Co., Uber Technologies Inc., Whirlpool Corp., Buffalo Wild Wings Inc., Perrigo Co. and Pandora Media Inc. resigned or announced their departures. Among those, only Whirlpool’s Jeff Fettig didn’t have to confront investor pressure in the months before announcing he will step down.
Their exits follow an especially busy season of upheaval in corner offices. In the first five months of 2017, 13 companies with market values of more than $40 billion installed new CEOs—including American International Group Inc.,Ford Motor Co., and Caterpillar Inc. according to an analysis for The Wall Street Journal by executive-recruitment firm Crist/Kolder Associates. That is more than double the CEO changes at mega-corporations in the same period last year.
This chief executive churn reflects a broader reality for the country’s business elite: An array of challenges—from increasing impatience on Wall Street and in boardrooms to a corporate landscape rapidly transformed by new technologies and rival upstarts—have made the top job tougher and more precarious than just a few years ago, top executives say. Even the biggest companies are vulnerable to shareholder disapproval and competitive forces that their size and stature once helped them fend off.
The typical CEO of a major company a decade ago resembled a ship captain “who could rally a group of people with a lot of process and procedures,” said Deborah Rubin, a senior partner at RHR International, a leadership-development firm. “Today’s CEO has to be much more like a race car driver,” she added. “You have to do the sharp maneuvers.”
Flush with more cash than ever, activist investors are pursuing bigger corporate prey. This year, they have helped push out the leaders of AIG, railroad operator CSX Corp. and aluminum-parts manufacturer Arconic Inc. Indeed, one-third of the 42 S&P 500 and Fortune 500 companies that replaced a CEO through May this year grappled with the demands of activist shareholders during the prior chief’s tenure, Crist/Kolder’s analysis found.
Through June 23, activists had launched nine campaigns targeting top management at U.S. companies this year—and the fastest pace since 2014, according to FactSet, a research firm.
Klaus Kleinfeld was forced out as chairman and chief executive officer of Arconic following heavy pressure from activist investor Elliott Management. WSJ's Marie Beaudette discusses why the battle over Arconic's future won't end with Kleinfeld's abrupt departure. Photo: Ryan Christopher Jones for The Wall Street Journal
Even GE CEO Jeff Immelt’s disclosure that he would depart this summer came amid brewing tensions with activist investor Nelson Peltz over the conglomerate’s languishing stock price.
Though the move was part of a long-in-the-works transition, Mr. Peltz’s Trian Fund Management LP had recently stepped up pressure on GE to cut costs more aggressively and boost profits, setting off speculation about when the longtime CEO might leave.
Mr. Immelt said he decided in 2013 that he would step aside sometime this year after 16 years at the helm, and GE board officials have said Trian played no role in the leadership change. “My predecessor did it for 20 years—it’s not a 20-year job today,” the 61-year-old Mr. Immelt said last week at the Aspen Ideas Festival in Colorado..
Growing shareholder clamor for quick results comes as new technologies are upending entire industries. If you run a retailer, for instance, “you are watching your whole market go away in just a matter of years,” said Peter D. Crist, chairman of Crist/Kolder.
J. Crew Group Inc. and Macy’s Inc., two such retailers that have struggled to adapt to consumer shifts created by online shopping and upstarts with more nimble supply chains, have recently appointed new CEOs. Both of their predecessors, J. Crew’s Mickey Drexler and Macy’s’ Terry Lundgren, are remaining chairmen of their companies.
Likewise, Ford’s ouster of Mark Fields after less than three years in its highest job was the starkest sign yet of how tech players such as electric-car maker Tesla Inc. and Alphabet Inc.’s autonomous-car unit, Waymo, threaten the traditional auto sector. Mr. Fields had been groomed for years to take Ford’s helm, but his fellow board members swiftly replaced him after he failed to persuade Wall Street he was reinventing the car maker quickly enough. Ford said Mr. Fields, who retires in August, wasn’t available for comment.
“That’s just not enough time to do that kind of job” required at Ford, said Bill George, former chief executive of Medtronic PLC who is now a professor at Harvard Business School. Some CEOs Mr. George speaks with, he said, are asking themselves “How much time do I have?”
Corporate boards increasingly reply: Not much.
“In boardrooms, sentimentality is officially dead,” said Constantine Alexandrakis, head of the U.S. for recruiting firm Russell Reynolds Associates Inc.
Such pressures aren’t just forcing boards to jettison CEOs. Donald Hambrick, a professor of management at Penn State University’s Smeal College of Business, said he suspected some corporate chiefs are voluntarily hastening their retirements.
Roland Smith, hired to run struggling Office Depot Inc. in November 2013, retired earlier this year after saying he had always planned to do so after three years. His tenure at the office-supplies retailer marked the fifth CEO stint for the 62-year-old turnaround specialist—and one of his toughest.
Mr. Smith’s latest challenge? A 13,000-mile motorcycle trip with his son from Key West, Fla., to Alaska and then Jackson Hole, Wyo. “I am in total control of everything I do on the (motorcycle) ride,’’ Mr. Smith said from the road last week. “As the CEO, you only are in control of a small proportion that happens.’’