Last year, Russell Reynold’s Global CEO turnover index listed that over a quarter of global CEOs were fired and in the UK this equated to a whopping nineteen CEOs of FTSE100 companies who were replaced.
Let’s take a look at the reasons behind some of the recent CEO changes and if it’s possible to know when the time is right to step aside.
Nick Read – Vodafone
Having already put in 20 years at Vodafone, Nick Read took on the role of CEO in October 2018. However, he immediately faced a multitude of frustrating challenges that most notably included failing to reverse a sharp fall in the company’s share price. As a result Read was ousted by shareholders in December 2022.
Proof that being a successful CEO is hugely reliant not just on achieving growth but demonstrating your ability to navigate economic turbulence to shareholders. Something that Russ Mould, Investment Director of AJ Bell summed up, “Read has faced some exceptional challenges in that time, notably an inflation crisis and a global pandemic; however, he has struggled to persuade the market and, ultimately his employers, that he has a strategic plan to help revive Vodafone’s growth.”
Bernard Looney – BP
One of the more scandalous CEO exits of last year, Looney was forced to stand down from the role he’d occupied for 3 years with immediate effect last December, as a result of failing to be fully transparent about personal relationships with work colleagues.
While Looney had admirable ambitions for the energy giant that included for BP to become net zero by 2050, his inability to be the bastion of professionalism expected of a CEO brought an abrupt end to his tenure.
For anyone who needed further clarification, the lesson that required learning here was succinctly encapsulated by a BP spokesperson: “All leaders in particular are expected to act as role models and to exercise good judgement in a way that earns the trust of others.”
Warren East – Rolls Royce
East was parachuted into the role of CEO of Rolls Royce in 2015 to turnaround the company plagued by scandals and profit warnings. While he successfully led the company through the worst of the pandemic, it was at the cost of almost 9,000 jobs and billions in losses.
What’s interesting about his exit is the fact the company faces one of the most significant technological shifts in its tenure, having to move away from fossil fuel-powered products and achieving net zero carbon business. This was clearly a task that East felt someone else was better suited to facing.
Alan Jope – Unilever
Another candidate who worked their way through the ranks, Alan Jope, started as a trainee for Unilever in the 1980s and, over 30 years later, was appointed the role of CEO in 2019.
Jope was pressured to step down from his role last year due to failing to successfully acquire the consumer health arm of GlaxoSmithKline. As a result and in contrast with Warren East, investors accused him of prioritising sustainability over core growth, which coupled with stock gains by their competitors P&G and Nestle only amplified Unilever’s flatlining stock price.
So is there an optimal amount of time a CEO should be in post?
According to Spencer Stuart, the average tenure of a UK CEO last year was 5.3 years which decreased from 5.4 years in 2022 and 5.8 years in 2021 to. But there are exceptions to every rule with CEOs still achieving extraordinary things over 20 years into their role.
Knowing when you’ve hit that moment when it’s the right time to walk away is not something that’s easy to grapple with, especially when you’ve sunk your life and soul into building up a business.
Being able to disengage from an emotional investment of such magnitude takes incredible strength and foresight. Especially considering how addictive having power and status can be. Organisational psychologist at Stanford, Bob Sutton, explains that leaders often struggle to leave because of the ‘four Ps’ – power, prestige, privilege and pay. A role that comes with a level of status, control, influence and wages the majority of workers can only imagine is always going to be tough to relinquish.
In a piece for Raconteur, board level HR practitioner, Amanda Rajkumar, provides some tangible advice to help the accurate timing of your exit strategy: ‘One of the best ways for CEOs to understand when it’s their time to go is to first work out what they want their legacy to be. It’s better to be remembered as a leader at the top of their game than someone without any new ideas.’
In conclusion
Of course working at the top of the tree will always come with risks. Last year’s numbers of CEO exits were eye watering but let’s put it into perspective. While it’s well above the post 2000 yearly average of 13, it’s still not quite the chaos of 2020 that saw 22 CEO departures.
It’s always pertinent to remember that, whatever your role in a business, no one is indispensable. A well-timed departure, especially if part of a smooth succession plan, can preserve and even enhance the legacy of their leadership.
But reassuringly, studies have confirmed the role at the top still provides more security than that of a football league manager.
