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The Great CEO Exodus

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Episode 3


BRIEFINGS PODCAST: THE GREAT CEO EXODUS


WHY ARE SO MANY CEOS LEAVING?

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Transcript
Episode 3


THE GREAT CEO EXODUS

NOTE: While this transcript has been reviewed, it may contain errors. Please
review the episode audio before quoting from this transcript.

Rupak Bhattacharya:
Hm, I wonder what's on TV.

News Anchor #1:
It's the highest single-month total of CEO exits that we've recorded since we
started tracking these numbers.

News Anchor #2:
Longtime YouTube Chief, Susan Wojcicki, she is stepping down. She announced so
in a blog post, and her garage was famously the first Google office, so she's
been there for a long time.

News Anchor #3:
CNN's Chairman and CEO, Chris Licht, is leaving the network. Licht took over the
network a little over a year ago.

Rupak Bhattacharya:
Okay, I get it. CEOs are leaving their companies, like big time. Also, it's
probably time I get a new TV.

Jill Wiltfong:
Hi, this is Jill Wiltfong, Chief Marketing Officer for Korn Ferry, and this is
Briefings, our deep dive into the world of leadership.

Today, we're looking at how so many CEOs these days have all of a sudden left or
been replaced. In the first half of the year, turnover at the very top hit
record levels. Some are being pushed out. Others are walking out. It's a
disruption to firms, to be sure. We call it the Great CEO Exodus.

With me today is Alan Guarino, co-founder of Korn Ferry's CEO Succession
Practice. We're going to talk today about what's going on, why this is
happening, how we got here, and what we can do about it. Hi, Alan.

Alan Guarino:
Hi, Jill. That's a lot to talk about.

Jill Wiltfong:
Well, I think you can do this. Alan, in the first half of the year, over 900
CEOs at US companies, private and public, have left. That's about five a day.
And this isn't just a US issue. CEO departures have been strikingly high in the
UK as well. What's going on?

Alan Guarino:
I have lots of CEOs that really don't love work, and that blows people's minds
when I tell them that. They think, as you said, "Oh, once you become a CEO-"

Jill Wiltfong:
Yeah, it's hard.

Alan Guarino:
No, they're unhappy with their board. Their board's not giving them the freedom
they want. They're unhappy with the analysts, because they have a 90-day window
to do it again every 90 days, and they don't have a chance to play the long
game. And they feel as though, although they won't tell anyone, they're playing
not to lose instead of playing to win. Why? It's a lot riskier to play to win.
There's all kinds of stuff going on in that C-suite at the top of the top that
people just don't appreciate, so it's tough.

Linus Sebastian:
I'll be stepping down as CEO of Linus Media Group. The truth is, I was never
really cut out to be a CEO. I'm a bottomless pit of creative energy, an
excellent motivator and speaker. But in addition to those strengths, I have a
lot of weaknesses, and chief among them is that I've just never really had the
attention to detail or the temperament that it takes to run an organization this
large.

Jill Wiltfong:
Well, that was a remarkably frank admission from Linus Sebastian, who's the CEO
of a small media firm. Most CEOs leaving haven't been quite so candid. But Alan,
whether it's a Fortune 500 company or a small business, how disruptive can these
changes at the very top be to an organization?

Alan Guarino:
It's the supreme shock. It is. The leader sets the tone for so many things, and
when a new leader comes in, the first thing that happens is all the people that
are key stakeholders around that new leader, that work under that new leader
start asking themselves, "Gee, does this person care about my career? Is this
person like me? Do I feel safe with this person? Can I work for this person?" So
that is energy that they didn't use to expend that much when they were in a
mature environment with a leader that had been around for a while. They knew
where they stood. Same thing happens with the board, who says, "Wow, this is a
new dialogue. This is a whole new discussion." They have to relearn what it's
like to interact with their CEO and how that's going to play out.

Jill Wiltfong:
One study that we saw from the International Journal of Financial Research
estimated the average cost of a sudden CEO departure at $136 million. Alan,
really?

Alan Guarino:
Average cost? I don't know. If it's the Fortune 50, put another comma and a B
after the number, because the shock to the system is huge. I wrote a paper
several years ago called the $40 trillion risk, because I aggregated the market
capitalization of all public companies in the world, and I said, "There is a $40
trillion global risk to shareholder value that is out there. It is not a black
swan. I guarantee you it will happen, and it will probably happen in three to
seven years for every company, period, that is publicly listed anywhere in the
world." What is it? The CEO is going to leave. That's what it is. It is a
massive risk to shareholder value.

News Reporter:
What do you think is the reason for this high turnover rate in this
post-pandemic era?

Alan Guarino:
What's behind the CEO turnover? Well, the first thing you have to ask is, how
many are leaving by choice, and how many are leaving because they're being asked
to leave? So when we hear about CEO turnover, we think, "Well, they're retiring,
or they're choosing to go." There's a pretty significant undercurrent around
CEOs and their boards thinking the company could be doing better or could be
doing things differently. So coming out of COVID, the COVID freeze I call it,
there is now this real pent-up desire to do things better and different, and
certainly growth is part of it, and this is not necessarily an economy that's
supporting growth for a host of reasons. So there's many, many reasons for the
CEO turnover, but it's not as simple as CEOs deciding they'd like to make a
change.

Jill Wiltfong:
And that was you, Alan, speaking there, and I completely hear what you're
saying, but I don't hear you using one key word that might explain some of these
departures, which is burnout. Could that be a factor here?

Alan Guarino:
It's a big factor, and it goes back to the cocktail of COVID and then pace,
complexity and globalization, pace, complexity and globalization is a recipe for
burnout to begin with. The playing field today for work is a professional
playing field. It's not Division II sports. It is the Super Bowl every day.
That's tiring, really tiring. You got to be in shape, and you got to find ways
to recharge.

Interviewer:
How do you address personal burnout? Do you have any advice for people that are
going through that? How do they hit refresh?

Satya Nadella:
I think the key is to be able to not overdo the connection to the thing that is
burning you out, but to somehow keep that flame, which is the core passion you
have, persist. That's, I think, the artform.

Jill Wiltfong:
That's Microsoft's CEO, Satya Nadella, speaking. And by the way, he hasn't quit.
So we've covered some of the mystery here behind the great CEO Exodus. There's
burnout. There's pressure from stakeholders, retirement. But assuming all these
departures aren't sustainable, what can companies do to keep CEOs around?
Actually, there may be some answers. More on that after the break.

Richard Nixon:
In all the decisions I have made in my public life, I have always tried to do
what was best for the nation. Therefore, I shall resign the presidency,
effective at noon tomorrow. Vice President Ford will be sworn in as president at
that hour in this office.

Jill Wiltfong:
So we're back with Alan Guarino, co-founder of Korn Ferry's CEO Succession
Practice, and we're focusing on why CEOs keep hitting the road. For those of us
in the US, Alan, we all remember or read about that famous resignation speech by
Richard Nixon. But in government, even with the most jarring departures, you
have a specific succession plan really spelled out by a country's government.
Businesses don't always have that. So how does that work when the CEOs leave
unexpectedly?

Alan Guarino:
When CEOs leave unexpectedly, there's a huge risk associated with the company
falling, stumbling and potentially getting into a track that could lead to
massive failure. And that's not an exaggeration. So the stakes are high. The
board has a fiduciary responsibility to be sure they're ready for this. It is a
critical responsibility of either the compensation or the nominating governance
committee of the board to be ready for that issue.

Jill Wiltfong:
So, Alan, we spent a lot of time talking about the situation and what's
happening in the world today. What's the solution? How do we keep CEOs on
longer, or how do we better prepare for their departure?

Alan Guarino:
I think you keep a CEO the way you keep any employee, the way you keep any
colleague close or partner. Listen to them. Give them the opportunity to take
risk. And obviously this is the board that's empowered to do these things. And
at the end of the day, the CEO serves at the pleasure of the board, so if the
board wants to move the CEO on, then that's their choice, and they brought
around the change. And if the board, for whatever reason, creates an environment
that the CEO believes is dysfunctional, at some point they're going to go. But
like any dysfunctionality, that's usually a two-way street. Takes two to tango.
CEOs have to work with their boards. Boards have to work with CEOs. Focus on
customers, get the job done, take care of your people, and I think CEOs are
happy. They'll stick around longer.

Rupak Bhattacharya:
Hi, I'm Rupak Bhattacharya. Thanks for watching and listening. Here's what else
is happening in the world of business from Korn Ferry's This Week In Leadership,

News Anchor #4:
More and more companies are cutting their diversity, equity, and inclusion
programs.

Rupak Bhattacharya:
After years of growth, support for DE&I programs has declined. Between July of
last year and this year, DE&I job postings fell 38% on one major site alone.

Archival:
Good morning, everyone. Welcome to the meeting. For this meeting, we do require
you to have your cameras on.

Rupak Bhattacharya:
According to one survey, nine in ten executives now take a dim view of people
who turn off their cameras on Zoom. They question if these workers have a future
at the firm.

J.R. Whalen:
Is feedback now too harsh? More companies are opting for a gentler term.

Rupak Bhattacharya:
And finally, the word feedback may be on its way out of the corporate lexicon.
In efforts to decrease employee anxiety, some companies are instead opting for
the word feedforward. Similarly, the word review is also endangered, as
performance reviews are now being called connect sessions or check-ins by some
companies. For more insights on business and leadership, head to
kornferry.com/insights.

Jill Wiltfong:
The Executive Producer of Briefings is Jonathan Dahl. Today's episode was
produced by Rupak Bhattacharya, Chelsea Starks, Nadira Putri, and Teresa Allan,
and edited by Jaron Henrie-McCrea. It contains reporting by Russell Pearlman,
Arianne Cohen, and Peter Lauria. Our video segment contains original artwork by
Frazer Milton, Hayley Kennell, Jonathan Pink and Sasha Kostyuk. Don't forget to
read our magazine, available at newsstands and at kornferry.com/briefings.
That's it for Korn Ferry's Briefings. I'm Jill Wiltfong. We'll see you next
time.

In the first half of this year, CEO turnover hit a new high—and it’s not yet
showing signs of slowing down. It’s a potentially massive disruption to firms,
but few can really explain it.

Join us in this episode where our host gets to the bottom of this CEO mystery
with our Vice Chairman in the CEO and Board Services, Alan Guarino.


Transcript
 * Podcast Guest
   
   
   ALAN GUARINO
   
   VICE CHAIRMAN
   KORN FERRY
   
   Co-founded Korn Ferry’s CEO Succession Practice, an industry leading model
   that transformed the approach to CEO succession management. He leads senior
   executive search and C-Suite succession assignments for large Fortune 500
   companies as well as smaller growth companies.
   
   Learn more


PODCAST EPISODES

 * All Episodes
   
   BRIEFINGS PODCAST
   
   A new deep dive into leadership.
   
   Listen now
 * Episode 5
   
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 * Episode 2
   
   BRAINS BACK TO WORK
   
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   Listen now
 * Episode 1
   
   BACK TO WORK...FOR WHAT?
   
   The fierce debate over where employees should work has now dragged on for
   three years.
   
   Listen now

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for more episodes.


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