CEO turnover

   Interesting fact about BP CEO Tony Hayward’s departure and I have to agree with the WSJ here.  He is not departing the position with a huge payoff as many other big time CEOs do. Yes, he is getting a severance package but it is not even close to what we have seen over the years when troubled CEOs leave their offices. As the Journal says:  “While Hayward may, inwardly, be smarting, he is stepping down with dignity. A lesson other corporates would do well to note.”

I think that CEOs who act with dignity and integrity can help restore the state of CEO reputations today. Of course, as the Journal points out, there are many other reasons that this may have come to past but I think that the message is clear that BP now starts the recovery period of repairing their once-esteemed reputation and even a departing CEO can play a role beyond his or her tenure.

  I have been mighty busy of late. I think about posting all the time but the days seem to leave little time for reflection. Several items of interest have been collecting in my reputation-obsessed brain so here are a few for an early Sunday morning.

It seems that many people are learning about “leadership” these days. Because people know about my keen interest in the reputations of leaders, I get asked when I am among friends what I think of Obama’s leadership. The discussion usually gets heated because everyone is now an expert on the topic as we read and hear about how President Obama is dealing with the oil spill in the Gulf of Mexico. For me, President Obama is exhibiting “no drama” leadership. I do not need him to be overly angry, emotional and making a human spectacle over the man-made disaster now at his doorstep. The majority of the American public that elected him did so exactly because he was reasoned, calm, rational and thoughtful. We got what we voted for. 

Yesterday’s WSJ had an interesting article about the importance of “near misses” or close calls in the science of disaster. This type of study is really the science of risk assessment, something that many industries do regularly to calculate the chances that something will go wrong.  Nuclear power companies are big fans as are industries such as aviation, NASA and more. For example, NASA puts the chance of any shuttle mission ending in disaster at 1 in 89. Sounds like risk-y business to me.  The concept of assessing a company’s “near misses” is appealing to the reputation protection business. If a company could regularly tabulate and review  its near misses, it might be able to prepare for improbable events and develop strategies that come in handy when a crisis arises. I recall reading about a hospital that meets monthly to review its near misses where things could have gone much worse for patients and other members of the facility.  The regular discussion among hospital staff sensitized them to how human error could raise the risks they face every day and make them more alert for problems that might surface. I think it would be a good idea for companies to regularly practice “near misses” meetings to review how they would react quickly, who would do what, what else could go wrong and what would protect their reputation from  full-blown disaster. We might have fewer reputation scars if we practiced better.

The third item I thought I should mention this morning was that Booz & Co. released their comprehensive CEO succession annual research. Many years ago, I started a database on CEO turnover when I realized that CEOs were losing their jobs by the boatload. It may have been in 2001 when Enron exploded but it became a major source for the media on who was in and who was out. It was a great deal of fun compiling all the stats on why CEOs departed, the average tenure of departing CEOs, regional variations and all the many reasons for the rising turnover rate.  I have to say that I miss being in the quarterly departure rate business. We stopped doing it because it was so time intensive. But I was one of the first to report on CEO turnover and for that reason, I totally enjoy the Booz report every June.  A few details are worth noting because CEO turnover is explicitly tied to company reputation recovery. One way to get a company’s reputation back on track is to bring in a new CEO over a CEO who did not do the job. It is one way of providing a clean slate and giving the company a grace period to correct failings and start anew.

• The number of forced CEO turnovers declined indicating that boards are getting better at picking the right candidates and supporting them.
• There has been a “harmonization” of CEO turnover rates regionally with 10 year averages between 12 and 14%. The US used to be known for its rising CEO turnover rate but it seems to have evened out worldwide.
• The trend towards a separate Chairman and CEO is real and growing. North American companies are now splitting the role more often which is quite a change from years ago. Comined roles (where one person holds the CEO and Chairmen job)  in 2009 fell to 16.5% in the US and 7.1% in Europe. Years ago, the figure in the US was about 50%. Interestingly, Booz reports that no one governance role (separating the roles or combining them) outperforms the other.
• More companies are having their outgoing CEOs become chairmen and annoint the incoming CEO as an “apprentice” CEO. The chairman oversees the growth of the CEO this way.
• Insider CEOs continue to be the norm, perform better and last longer.

There are many more interesting details in the research which I hope to cover in another post. This one is getting too long for casual reading. Enjoy your Sunday.

Geoff Colvin’s article in Fortune this week was about problems that seem to crop up repeatedly in his interviews.  The one that caught my attention was the complaint he keeps hearing that “My Leader Won’t Lead.” If you have been reading my blog, this is one of my recurring themes. Leaders need to step out of the shadows and speak up. Colvin recommends as part of his Recession Checklist that CEOs “Stand Up and Be Seen.” He says that it’s an easy and powerful way to be effective. He cites the raised profile of Warren Buffett who has helped calm the markets during these tough times.  Colvin remarks that standing up and being seen does not require tons of investment and technological wizardry. I agree wholeheartedly. We’re not talking about celebrating celebrity CEOs, but building back CEO reputations and credibility when perceptions of this office are so low.

This morning I ran across an article in The Economist that went a long way in confirming what I already believe and hopefully outlined in “Resetting CEO Reputation” in the Huffington Post. The Economist describes how our rejection of celebrity CEO types resulted in too many companies full of “faceless” CEOs. I had to laugh out loud at this line: “Watch the parade of chief executives who appear on CNBC every day, or drop in to a high-powered conference, and you begin to wonder whether cloning is more advanced than scientists are letting on.” Pretty clever. The writer then carefully explains why most CEOs are faceless today and who’s to blame them! Everywhere you turn you find board-fired CEOs, public anger about overboard executive compensation and management consultants calling on CEOs to be more humble and Everyman. The Economist warns us: “Yet there is surely a danger of taking all this too far. A low profile is no guarantee against corporate failure… In general, the corporate world needs its flamboyant visionaries and raging egomaniacs rather more than its humble leaders and corporate civil servants. Think of the people who have shaped the modern business landscape, and ‘faceless’ and ‘humble’ are not the first words that come to mind.” A reasonable point. The article advises leaders to be bold, not bland. In another line that hit home, the writer says: “These are people who have created the future, rather than merely managing change, through the force of their personalities and the strength of their visions.” Less managing and more leading.

Essentially, Colvin and the Economist writer are calling for leaders who may be talented guys and gals operationally but who also recognize that they can lead us out of this unprecendented economic downturn by putting a face on their companies and being memorable without being too glitzy. As the article notes at the end, “There is no long-term comparative advantage in being forgettable.” Amen. If the two can be combined and why not, we can have our cake and eat it too.

One of my favorite all time subjects is CEO reputation. I spend alot of time thinking about how it is changing, are there new shifts, who is doing what, how they can improve reputation and other meaningful and meaningless thoughts. Over the past few months I have mentioned on this blog my growing sense that CEOs are finally leaving their bunkers and starting to engage with stakeholders. They certainly have been communicating internally but signs are pointing to the resetting of CEO reputations.

I was lucky enough to have something published yesterday on the Huffington Post blog site about CEO re-emergence. Take a read.

CEO turnover seems to be topical right now. Perhaps it is because quarterly CEO turnover results are being reported or because everyone is still interested in these captains of industry, despite the poor reputation of CEOs. In the past few weeks, I’ve noticed several articles about why no one at the top is playing musical chairs like they used to. Here is an article that I was recently quoted in on CEO turnover because of my keen interest in CEOs and what’s happening to their reputations.

Luckily I noticed an article on the last page (hard copy) of today’s WSJ “B” section on apparel CEO William McComb of Claiborne. Joann Lublin called him a “survivor chief executive” or what I might rename a survivor-in-chief. This nomenclature is presumably due to the fact that boards are not as trigger happy as they used to be because they cannot afford to rock the markets nor their stock prices anymore than they have been this past year. There are several other reasons why CEOs are remaining in their suites:

1. Boards are abiding by the proverb: “Better the Devil you know than the Devil you don’t.” Familiarity does not always breed contempt. It may breed job security and comfort instead.
2. CEOs themselves are less likely to be looking for new jobs because of the slim pickings and accompanying risk. There are no risk-free companies anymore.
3. There are fewer mergers and acquisitions. In most M&As, one of the CEOs usually leaves for greener pastures or the golf course. Just being sarcastic. Most CEOs do not want to be seen on the golf course these days.

Everyone is sitting tight right now to weather the economic headwinds. My sense is that CEO turnover will heat up again once the economy stabilizes and boards are willing to take on more risk without angering investors and raising questions from the media.