Navigating the Corporate Minefield

“This was 2007, and Motorola was under significant stress,” recalls Greg Brown, former COO at the time. The company was losing millions every quarter, the cellphone business was crashing, and there was a lot of internal upheaval. But then, CEO Ed Zander stepped down, and Brown was tapped to take over.

Fast forward fifteen years and Brown’s success is remarkable. Stock in his company, now Motorola Solutions (MSI), has returned 668%, compared to the S&P 500’s 338%. He is just one example of what we call “forever CEOs,” along with the likes of Jamie Dimon, Warren Buffett, and Bob Iger. These leaders have consistently beaten the market and held their positions for decades.

Unfortunately, this trend is becoming less common, with CEOs facing increasing pressure to deliver results quickly and prove their worth in record time. Companies like Walt Disney, Starbucks, and GameStop have all experienced high levels of CEO turnover in recent years.

But how can CEOs navigate this minefield and achieve long-term success? We explore tactics and strategies in the following sections.

The Shifting Landscape of CEO Tenure

Equilar, the corporate leadership tracker, has recently released a study on the average tenure of S&P 500 CEOs between 2013 and 2022. The results indicate that the tenure has decreased by 5.2%, from 7.6 years to 7.2 years.

However, the median CEO tenure has suffered a more drastic plummet during the same period, plunging by 20% from six years to 4.8 years. This staggering shift is primarily due to the long-standing CEOs who have been in the C-suite for decades, leading to a skewed average.

Jim Citrin, head of the CEO practice at Spencer Stuart, mentions that CEO jobs are brutal. It not only requires resilience but also an orchestra maestro to manage myriad risks and coherts that hardly existed two decades ago. The explosion of activist investors and private-equity deal makers has resulted in inexorable pressure for better quarterly results. Social media has also brought radical transparency with critique-driven sites such as Blind, scrutinizing every move. Consequently, a seismic digital transformation can make a hidebound CEO obsolete with just a few clicks.

The current landscape requires CEOs to adapt and pivot swiftly to thrive. With an array of external and internal challenges, CEOs must display an exceptional ability to navigate complex issues while remaining agile and innovative.

In today’s complex corporate landscape, being a successful CEO is about more than just delivering financial results. With a growing emphasis on environmental, social, and governance factors, as well as cultural issues, leaders must navigate a multitude of challenges and stakeholders to drive success.

The implications for both CEOs and investors are significant. Long-tenured CEOs tend to produce better returns, however, only 25% of S&P 500 CEOs remain in their jobs for 10 years or more. So, what happens when a CEO needs to be replaced?

According to a PwC study, companies that have to fire their CEO forfeit an average of $1.8 billion in shareholder value compared to companies that plan for a successor. The cost of a bad CEO hire is tremendous, as it can take over a year to fill the position and get the new leader up to speed.

For CEOs, these factors introduce an unprecedented level of pressure, with winners celebrated and losers lambasted in the public eye. It’s essential for leaders to weigh in on these issues both internally and externally, while balancing the priorities of shareholder capitalism versus stakeholder capitalism.

The key to success lies in navigating this landscape while maintaining strong financial performance. Long-tenured CEOs tend to do just that, delivering stronger returns on average and outperforming the market. For businesses to succeed over the long term, it’s crucial to plan for CEO succession and ensure that the right leader is in place for the challenges ahead.

Qualities Boards Should Look for in Future CEOs

Identifying a CEO with the potential for long-term success is not an exact science. However, there are key attributes that boards should consider early on, says executive recruiter, Citrin. These include a desire to continue learning, openness to new ideas, ability to attract excellent talent, transparency about the company’s progress, and a willingness to make bold investments, even when the payoff may not be evident until years down the line.

While there are CEOs who have hit their stride, including Nasdaq’s Adena Friedman and American Express’s Steve Squeri, they are the exception rather than the rule. Since taking over in 2018, Squeri has overseen an 87% return for Amex compared to the S&P 500’s 77%. Similarly, Friedman has seen Nasdaq’s stock rise by 145% since taking on the CEO role in January 2017.

However, according to executive coach Dewar, many people don’t fully appreciate just how challenging the CEO role can be. Balancing competing demands is increasingly complex, and an effective CEO must be a master of integration. The job isn’t just about overseeing day-to-day operations – at least half of the time is spent on other things. Being a good CEO requires a different skill set than being a COO who manages the day-to-day running of the business.

So while there may not be a single formula for a successful CEO, boards would do well to keep these qualities in mind when looking to identify the right person for the job.

The Challenges of Being a CEO

Being a CEO is undoubtedly one of the most grueling positions in business. Whether it’s due to having to make difficult decisions or dealing with internal conflicts, there is never a dull moment for those in the top position. Such is the case for Greg Brown of Motorola, who had to make some tough choices during his tenure.

As Brown described it, the first six to nine months were very sobering, as he had to announce the intention to spin off the company’s flagship business – the cellphone division. Four months later, a settlement was reached with Carl Icahn, who was provided board representation. Despite the challenges faced, Brown remains focused on the present and future, as he is not one to dwell in the past.

Other CEOs, like Gene Hall of Gartner (IT), who has been at his position since 2004, have been successful in more subtle ways. He may not be flashy, but Silicon Valley power broker Maynard Webb suggests that Hall is a “Level 5 leader,” a term coined by Jim Collins in his book, Good to Great. This type of leader is described as having “a powerful mixture of personal humility and indomitable will.” This leadership style has paid off for Gartner, as its stock has returned 2,857% during Hall’s tenure, versus 477% for the S&P 500.

Being a CEO is not for the faint of heart, but those who are successful can make a significant impact on their companies and industries.

Faye Wattleton: Breaking Barriers and Inspiring Leadership

Leading a complex organization such as Planned Parenthood is not an easy feat, and the challenge becomes even more daunting if you are the youngest person and the first Black woman ever selected to run it. In 1978, Faye Wattleton found herself in this exact situation. Nevertheless, she persevered and went on to lead the organization for 14 years while also serving on numerous company boards such as Estée Lauder and Empire Blue Cross & Blue Shield.

However, achieving success did not come without its fair share of obstacles. As Wattleton recalls, “We were coming under attack. The year before, the Minnesota affiliate had been burned to the ground. There were those who had no confidence that I could handle the job. One board member said, ‘No woman can handle a job this big.’” This was despite the fact that Wattleton’s two male predecessors, who were both men, lasted less than two years each.

Despite these long odds, Wattleton thrived by stepping up to the challenges and public scrutiny that came with her role. According to her, “A CEO used to be able to be a colorless character. Now, with the power that has been accrued by shareholders and stakeholders, the public aspect of leadership is very significant.”

Wattleton’s experience shows that successful leaders can emerge from any organization and that barriers can be broken with determination and resilience.

The Rise of Forever CEOs in Tech

The tech sector has a reputation for producing some of the most recognizable forever CEOs, who have cemented their names in history books and the public consciousness. Bill Gates, Jeff Bezos, and Larry Ellison are just a few examples of founders who stayed in the CEO position for decades before finally stepping down to become chairman.

One founder CEO who is still unquestionably in charge is Jensen Huang, who has been at the helm of Nvidia (NVDA) for the past 30 years. Shareholders of the technology company have been handsomely rewarded over the years and may hope that Huang will remain in the CEO position for another 30.

Non-founder CEOs have also had great success leading tech companies. Tim Cook has been the CEO of Apple (AAPL) since 2011, and Shantanu Narayen has been the CEO of Adobe (ADBE) since 2007.

From Minuscule Entities to Juggernauts

Howard Schultz and Warren Buffett are two examples of “might-as-well-be-founders” who took small entities and transformed them into industry juggernauts. The 92-year-old Buffett, who has been the CEO of Berkshire Hathaway (BRK.A, BRK.B) since 1965, holds the title for the greatest-of-all-time forever CEO. This record of holding a CEO position for 58 years is unprecedented. By comparison, Armand Hammer, who was known for his long tenure running Occidental Petroleum, was CEO for a mere 33 years.

There is no doubt that forever CEOs have left an indelible mark on the tech industry, and their lasting legacies are a testament to their leadership skills and innovative ideas.

The Strengths and Weaknesses of Forever CEOs

Starbucks CEO Howard Schultz has been lauded for his long-standing leadership, with the company’s stock skyrocketing since its IPO in 1992. However, Schultz’s inability or reluctance to find and groom a successor could potentially pose a problem for the coffee giant. Despite leaving and returning to the CEO role twice, Schultz has recently handed the reins over to Laxman Narasimhan. Narasimhan, who previously served as CEO of consumer goods company Reckitt Benckiser for three years, joins a growing list of short-term CEOs.

Similarly, Bob Iger has had a back-and-forth journey as Disney’s CEO, first from 2005-2020, stepping down, then returning in 2021 after the removal of his successor.

While Bank of America analyst Jessica Reif Erlich notes the challenges of taking over a large company during turbulent times, questions have been raised regarding Disney’s cultural issues in Florida. Erlich refrains from making any statement on the matter, but acknowledges that it has become a political issue.

For now, many believe Iger may be the only person capable of leading Disney successfully. As he considers his legacy and chooses his successor, Iger’s experience and skill will undoubtedly guide his decision-making process.

Succession Planning for Bank CEOs

As the years go by, many high-profile bank CEOs are facing the succession test. Jamie Dimon, CEO of JPMorgan Chase (JPM) since 2006; Brian Moynihan, Bank of America (BAC) CEO since 2010; and Morgan Stanley’s (MS) James Gorman, who also got the job in 2010. Gorman announced that he will step down by May next year, with no successor named yet.

Speculations about who will succeed Dimon have been rife for years, with numerous candidates departing. (Try Googling “Jamie Dimon successors.”) And it’s worth noting that all three are short-termers compared with Blackstone (BX) co-founder and CEO Steve Schwarzman, who has been in the corner office for 38 years.

So, when is the right time to step aside? According to Dave Cote, rock star CEO of Honeywell International (HON) from 2002-17—during which time the company’s stock returned 372% versus 190% for the S&P—he knew he wanted to leave when the company was doing well because he didn’t want his successor to be burdened with problems.

“And I wanted to make sure that I didn’t lose potential successors just because I wanted to hang around. You can’t wait too long or the recruiters are going to pick off your good guys,” Cote says.

But is that what’s going on with Dimon? “I’ll let you sort that one out,” Cote says laughing. Actually, Dave, that’s for the JPMorgan board. Because no CEO, not even Dimon, is forever.

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