Ralph Lauren’s Monarch Ways

This was the least surprising CEO resignation in recent memory, clearly predictable since Larsson’s arrival was announced in September 2015. That was big news; Larsson, who had turned around Old Navy and previously had helped build H&M, was the Ralph Lauren company’s first CEO other than Lauren himself. Headlines worldwide trumpeted that Lauren was stepping down as CEO, a message he apparently did not like seeing. So the very next day, Lauren emailed all employees: “I will continue to lead [the company] today as I have for almost 50 years. I am not stepping down, nor am I stepping back. I am stepping up.” Translation: The new CEO isn’t really the CEO; I’m running the show. It’s surprising Larsson remained as long as he did.

The larger issue is that Lauren is shaping up as what Yale’s Jeffrey Sonnenfeld termed a “monarch” in his classic study, The Hero’s Farewell: What Happens When CEOs Retire. A monarch is a CEO who will not go willingly. As Sonnenfeld reported of the monarchs he examined, “They identified with the heroic stature they held in the firm. The monarch’s arena of accomplishment was within the firm.” Obviously we don’t know whether Lauren, 77, fully fits this mold, but when you’re named Ralph Lauren, and your company is named Ralph Lauren Corp., it seems clear that a large element of identification may be present. The problem is that monarchs often damage their companies by hanging on too long. It must be noted that Lauren’s company has lost almost 60% of its value in the past two-and-a-half years, including a 12% drop yesterday on the news of Larsson’s departure.

The inspiring pattern that Lauren exemplified for many years was the extraordinary power of the right two-person team at the top. His partnership with longtime president Roger Farah fit the pattern exactly: Lauren was the company’s famous public face, Farah largely unknown to the general public; their skills were entirely different and highly complementary, with Lauren being the visionary and Farah the operating genius. Steve Jobs and Tim Cook were a classic duo, though unusual in that Cook became Apple’s CEO when Jobs died. Other great pairs: Berkshire Hathaway’s Warren Buffett and Charlie Munger, or, longer ago, Disney’s Michael Eisner and Frank Wells, or Coca-Cola’s Roberto Goizueta and Don Keough.

As teams, they all performed spectacularly. But sometimes (not always), when the secondary member leaves, the magic evaporates. That’s what happened at Disney, and it happened at Ralph Lauren Corp.; Farah retired in 2014, and the stock hit its all-time high later that year.

Ralph Lauren transformed the apparel industry and created a magnificent legacy. Let’s hope he breaks the monarch mold by finding a great new CEO and this time letting that person carry the legacy into the future.

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