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Commentary

Tyson CEO’s $3 Billion Decision

If you aren’t in the food business you probably paid little attention to yesterday’s announcement that Tyson Foods is changing CEOs. Donnie Smith will step down at year-end, to be succeeded by president Tom Hayes. But this seemingly ho-hum news is worth our attention because it exemplifies a large trend that affects everyone in every industry. Here’s how.

Tyson’s market value declined by $3.4 billion instantly when the company announced earnings, outlook, and the CEO transition. Much of that wealth destruction derived from disappointing profits and a downbeat revised outlook, but much of it also reflected investor concern that Smith – only 56, widely regarded as Tyson’s best CEO ever, under whom the stock has more than quadrupled in seven years – was leaving unexpectedly. “We are not at all happy to see Mr. Smith step down,” wrote analyst Timothy Ramey of Pivotal Research Group. “[His tenure] has been the best period of Tyson’s history, without doubt.”

The larger point is that this type of value-jarring scenario is playing out more often, and it didn’t used to happen. A single individual comes or goes, and a company’s value immediately rises or falls by hundreds of millions or billions of dollars. Consider:

-American Airlines COO Scott Kirby left to become COO of United Airlines in August. United gained $1.5 billion of market value on the news.

-Henkel Group and Adidas announced in January that Henkel CEO Kasper Rorsted would leave to become CEO of Adidas. Henkel immediately lost $2 billion of market cap, and Adidas, a smaller company, immediately gained $1 billion.

-Starwood Hotels and Resorts CEO Frits van Paasschen resigned abruptly in February 2015, and no successor was named. The company gained $420 million on the news.

-Mike Jeffries, the retail genius who made Abercrombie & Fitch a business phenomenon until he lost his touch, resigned in December 2014, and no successor was named. The company immediately gained $150 million of market cap.

-Microsoft CEO Steve Ballmer announced in August 2013 that he would step down within 12 months. The company gained $18 billion of market value in two hours.

At a time when the role of people in the economy is a matter of urgent interest – when technology is replacing not just drivers but also doctors, lawyers, and other highly educated, highly paid people – these examples illustrate a strong countertrend. At least in some situations, the value of an individual human, positive or negative, is greater than ever.

How broad is this countertrend? Are we moving toward an economy in which the skills of millions will be devalued while a few individuals will become hyper-valuable? Or will it be an economy in which a new set of high-value skills are available to everyone? I see strong evidence for the second future, in which those new high-value skills will be skills of deep human interaction. But I’m keeping an open mind. We haven’t seen this movie before, and it’s already a riveting story.

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