I think a CEO’s worst day is when he or she announces that he or she is resigning, no successor is named – and the stock goes up.
It isn’t all that unusual. On this date in 2012, Angela Braly announced she was stepping down as CEO of the health insurer Wellpoint, now known as Anthem. By the end of the day, the company had gained $1 billion of value.
Almost exactly a year later, Steve Ballmer announced he would be leaving Microsoft. The company gained $18 billion of value that day.
Last December, Abercrombie & Fitch announced that its longtime CEO, Mike Jeffries, was leaving immediately. That news was worth $150 million of market cap in one day.
This past February, Starwood Hotels and Resorts said CEO Frits van Paasschen had stepped down. By day’s end, investors had decided the company was now worth $350 million more.
In none of these cases did the company name a successor. Investors’ verdict was clear: anybody but him or her.
It would be nice to report that getting rid of the wrong leader caused all of these companies to prosper, but it isn’t so, as we’re reminded by Abercrombie’s recent earnings report. The company beat analysts’ dismal expectations; sales were down by less than was forecast. But despite the burst of hope when Jeffries quit, the stock is still in a long decline that began while he was in charge. Similarly, Starwood’s stock rose for a few months after van Paasschen left but then turned down and is now lower than when he was there. By contrast, Anthem and Microsoft have done well since their leadership upheaval.
The explanation seems clear. Anthem and Microsoft, having said goodbye to the wrong CEO, then installed the right CEO – Joseph Swedish at Anthem and Satya Nadella at Microsoft. But Abercrombie and Starwood still don’t have permanent CEOs. Each has an able executive sitting in. At Abercrombie, Arthur Martinez, a 75-year-old retail veteran famed for saving Sears in the 1990s, is executive chairman. Starwood’s interim CEO is a director, Adam Aron, former CEO of Norwegian Cruise Lines and Vail Resorts. Both companies are still searching for a CEO.
The clear lesson is that every organization needs a leader every day, and there’s no substitute for a CEO who’s in it for the long haul and who bears the full weight of responsibility on his or her shoulders. You can’t blame investors for feeling exhilarated when the wrong CEO finally leaves. But investors, employees, and directors mustn’t forget that the top executive’s departure is only half the job of getting a company back on track, and it’s the easy half.
What We’re Reading Today
Google responds to Europe’s antitrust accusations
The search giant denied it favored its own search results and argued that other companies, including Amazon, compete in the region. The European Union’s antitrust chief, Margrethe Vestager, has accused Google of abusing its dominant position in online search. NYT
Hillary looks for a Super Tuesday knockout
As Democratic strategists show growing concern that she hasn’t done enough to quell the controversy surrounding her emails, Hillary Clinton has pinned her campaign hopes on March 1. Her staffers have worked toward that day – when 11 states hold primary votes – since before the campaign launched, in part to avoid a repeat of what happened in 2008 when Barack Obama took control of the race. Politico
Apple announces new event on September 9
It lands around the time Apple typically hosts journalists to show off their latest offerings. This year, analysts expect to see the next version of iPhones with a much improved camera. It’ll be a boost for Tim Cook‘s company, but does it need that ‘one more thing‘ for the stock to recover fully? The Verge
Dole execs to pay shareholders $148 million…
…for undervaluing the 2013 buyout of the fruit grower. CEO David Murdock and a former official were found to have deliberately deflated the stock price in order to buy the company cheaper. WSJ
Former franchisee claims Subway knew about Jared
Cindy Mills says that Jared Fogle called her as early as 2008 to discuss his attraction to young girls. When she shared her complaints with Subway, she says they were ignored. Business Insider
Time for the Times to release the reins
As traditional media companies struggle with the changing dynamics of the online world, is it time for the Sulzberger family to release its control over the New York Times? By most measures, they need some help. Fortune
Building a Better Leader
Gap phasing out on-call scheduling
It follows Abercrombie & Fitch, Starbucks, and Victoria Secret in scrapping a policy that forced employees to remain available for last-minute shifts. The move comes four months after New York State attorney general Eric T. Schneiderman questioned the legality of the practice. NYT
CEO pay continues its rise
The latest numbers from the Conference Board, which accounts for stock options and pensions, show pay up 11.9% in 2014. MarketWatch
Steve Jobs knew how to run a meeting
A new video from his days at NeXT, which Jobs founded after being booted from Apple in 1985, shows how he kept everyone on track while also displaying his passion. Inc.
Ten Years Later
Obama visits New Orleans…
…two days before the tenth anniversary of Hurricane Katrina. In a speech, he called it a “man made disaster” caused by government failure. NBC News
We’re not ready for another Katrina
Threatened by rising sea levels and poor infrastructure, many cities, particularly in Florida, would suffer New Orleans-like flooding if a hurricane were to destroy levees. Wired
Not the same Bush
Jeb Bush has used the anniversary to highlight his strong efforts following the storm and governing Florida through a series of hurricanes in the years surrounding Katrina. He’s also walking a fine line by distancing his actions from those of his brother, George W. Bush, who was president at the time. CNN
The key players of 2005, today
For five leaders including former mayor Ray Nagin and FEMA director Michael Brown, much has changed in the ten years since Hurricane Katrina defined them. Fortune
Up or Out
Michael Tomlinson will step down as director of sales at Aflac because of health concerns. Andrew Glaub will replace him. Bloomberg
Werner Enterprises CEO Greg Werner will retire. C.L. Werner, the trucking company’s founder and chairman, will fill the top spot. MarketWatch
Fortune Reads and Videos
Russia to BMW team: No schnitzel for you!
The consumer protection agency Rospotrebnadzor seized 1.5 tons of food from a BMW racing team, in Moscow training for a race. Fortune
Intel sees a future in Altera chips
Jason Waxman, VP & GM of Intel cloud platforms, says he believes Altera chips will run on a third of all data centers by 2020. That would make the $16.7 billion that Intel paid for Altera seem cheap. Fortune
Researchers create material that can heal itself
The substance, developed with NASA funding, can self-seal a hole in less than a second. It will serve as an extra protection for spacecrafts, and entrepreneurs may have ideas for other uses. Fortune
Google undermines Apple security…
…with new developer instructions. It’s not the first time. Fortune
Sheryl Sandberg, Facebook COO and author of Lean In, turns 46 today. Biography
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|Produced by Ryan Derousseau|