Trouble in Paradise – A story on the current CEO crisis haunting many tech giants!!

While running through the archives, I came across the article which stated that “the cost of CEO failure can cost an economy like U.S. as much as $13.8 billion" (I assume the figure would have gone further up). In addition to the monetary loss, an abrupt departure by senior executives can be a real headache for communicators because the rumour mill will often go into frenzy about the event. And rumours are usually worse than the truth. When Steve Jobs retired as Apple Inc. CEO in August 2011, he was one of 104 chief executive officer departures announced by U.S.-based companies in the month, according to the latest report on CEO turnover released Sept. 7 by global outplacement consultancy Challenger, Gray & Christmas Inc.     

Resignation has most often been the cited reason for CEO departures, followed by retirement and CEOs "stepping down".

The turn of events in 2011 saw a lot such succession at some very high-profile technology companies – IBM, Apple, HP and Yahoo to name a few. However, the top job change is more common than we might expect, with an average tenure of a Fortune 500 CEO is just 4.6 years.

Well for a few the change took for inevitable circumstances, Tim Cook for Apple; while for a few more that was a corporate relief – Yahoo or HP. IBM can nevertheless count itself lucky for having a school of enlighten people taking the helm and the recent departure of Sam could only offer the opportunity to Ginni Rometty to carry the legacy forward.

But why has there been a crisis off late to fetch the “Blue-eyed Top Boss” with nearly 80-85% of CEOs of S&P 500 companies have been ousted before retirement. Moreover there’s sufficient confirmation, companies and boards are generally unprepared for the abrupt departure.

HP kicked out CEO Leo Apotheker after barely a year in and replacing him with former eBay boss Meg Whitman. He becomes the third straight HP CEO shown the door. Yahoo! took the game ahead and fired their CEO over the phone by the Chairman of the Board. TechCrunch noted in June that Yahoo was quietly looking for a replacement for Bartz — something which Yahoo (obviously) denied and other press ate right up. Yahoo even talked about the post at their shareholders meeting and essentially called it “bullshit”. Funny!! Again, who would have ever thought that AOL purchasing TechCrunch wouldn’t go down as a completely smooth journey off into the sunset? Now, reports are out that CEO Heather Harde is quitting after disagreements with The Huffington Post, which is running the AOL content show these days.

A common belief is that corporate boards want a “BAGPIPPER” in the face of its CEO, to get things straight and churn profit instantly – a call very tough to implement. This has caused a critical disconnect between the CEO and the board, and ultimately caused separation. While I have never voted for an incompetent boss nor patronized their excuses of a troubled economy; I do buy that a captain can be as good as his team!! A true CEO create an environment where people tell them things and take feedback, however, insecurity causes many CEOs to reserve critical decision rights to themselves, thus losing out of top thoughts from top brains. This lack of trust reflects on the balance sheet and ultimately towards the CEO being shown the doors. And finally, a clash over remuneration and better opportunity instigates the departure.

Most companies are unprepared for a CEO exit. But what the statistics don’t show is the impact on each company’s stock. Yahoo, Berkshire and Hewlett-Packard obviously have suffered from the succession drag and things should worsen if the leak isn’t checked!!