Fresh off the season finale of the hit HBO show Succession, I can’t help but think about the topic itself as we approach the end of 2021. Logan Roy still has his job for now, but the succession plan at Waystar Royco is murkier than ever.
In the real world, CEO turnover is seeing upticks, and evidence suggests board turnover could increase as well.
New regulations for board composition are leading some companies to encourage resignations. Survey data shows directors reporting higher levels of conflict with their peers. Companies are looking for a wider range of board skills and experiences. The pressure to meet new business standards is at an all-time high.
Also, the actual work experience of board leaders has changed quite a bit in the last two years.
“Directorship has become an actual job, it’s not an entitlement you receive after an illustrious career in the C-suite,” Friso van der Oord, senior vice president at the National Association for Corporate Directors, told Fortune. “It’s a hard job.”
For all of these reasons, boards may shake up more in 2022 than any previous year. The cascading effects could be significant.
In July 2020, the rate of CEO departures began to match pre-pandemic levels, according to executive staffing and consulting firm Challenger & Gray. A peer of theirs, Heidrick & Struggles, also noted increases across 2021.
“Our belief is that it will only accelerate going into next year as people have delayed their retirements,” Jeff Sanders, co-managing partner of Heidrick’s global CEO and board practice, told Reuters. Challenger & Gray also hypothesized that an inability to meet external candidates during the pandemic may have slowed CEO turnover.
An analysis of CEO departures since 2004 found that January has been the month with the most departure announcements on average in that time. The next month could be an important barometer for how next year will go.
“Clearly boards are spending a meaningful amount of time on succession planning, both for the CEO and the C-suite, as well as how they think about their board composition,” Janet Foutty, executive chair of the board at Deloitte US, told Fortune.
Foutty was the lead author of a report which highlighted how directors are becoming more of a “face of the organization” both internally and externally, and gaining new insight into the company and future potential leaders as a result of wider exposure to the company’s ecosystem.
Leading companies are getting more sophisticated in how they develop their leadership bench and going deeper in the organization with their efforts, Foutty said.
Another recent survey of board and C-suite leaders projected that in 10 years, upskilling and succession will be their top two risks, while adapting to new regulations and hybrid working models are also still expected to be key issues.
If leaders are not capable of changing their ways in order to shepherd a company through such transformational times, it may be time to explore new options.
While 52% of board leaders in a PwC survey said they were for tying DEI to executive compensation, the rest do not. Survey respondents expressed doubts that enough diverse candidates existed for board positions and that personal networks play too large a role in board candidate sourcing. All three of these sentiments were more strongly represented among male directors according to PwC.
In order to shift the mindset away from those problematic beliefs that impede progress on many levels, the people holding corporate leadership positions need to change. Paul Polman, former CEO and board chair at Unilever, says that he believes a significant refresh is needed.
The Great Reshuffling appears to be coming for the corner office, and the boardroom.
Are you ready for that?
Programming Note: This is the final Modern Board newsletter of 2021, and the final one arriving on the current monthly cadence.
We hope you’ve enjoyed reading this guide to modern corporate leadership during its soft launch. I’m excited to share that the first Modern Board of 2022 will be on January 5th and from that point on this will be a weekly newsletter!
As always please feel free to send any tips, comments, or love letters.
Aman Kidwai
aman.kidwai@fortune.com
Headlines
Amazon warehouse and other factory workers had their jobs threatened before they died
A startling headline to be writing, but apparently natural disasters do not phase certain corporate overlords, not when they have production numbers to hit. This was true throughout the COVID-19 crisis, and remained true during floods in the northeast and heat waves across the country.
This week, NBC News reported that multiple factory workers in Kentucky, where deadly tornadoes swept through the region, were threatened with firing if they left. A spokesperson denied the allegations, but multiple accounts from NBC suggest otherwise. CNN reports that the candle factory was running “24/7” to meet holiday demand and attendance was being taken at the shelter in the factory. But employees said they were not allowed to go home. At least eight employees are confirmed dead.
The same tornadoes hit an Amazon Warehouse in Illinois, where six people died. A report shows that one of the workers who died sent a text message to his girlfriend saying “Amazon won’t let us leave.”
Twitter’s new CEO the result of activist investors
The popular social network doesn’t get mentioned alongside Facebook, Instagram, or TikTok because it doesn’t have nearly the reach or monetization. Nevertheless, Twitter remains an influential place for culture and content, and it has a bright future if someone can make key decisions in the interest of innovation.
That person is not going to be the company’s founder, Jack Dorsey, who is out of the job two years after Elliott Management acquired $2 billion in stock in the company and attempted to flip the board and remove Dorsey. The exact language of his departure letter is unclear, but he may have stepped down a while ago.
This is not a normal situation–Dorsey has been splitting his time as CEO between Twitter and Square, the payments company that is doing quite well during the current e-commerce boom– but reports say he did not spend very much time working on Twitter. He is succeeded by Parag Agrawal, who was previously CTO.
“The board ran a rigorous process considering all options and unanimously appointed Parag,” Dorsey wrote. “He’s been my choice for some time… my trust in him as our CEO runs bone deep.” Twitter stock did see gains from the decision.
I wonder if another major social networking company would benefit–both on Wall Street and in the public eye–by removing its founder-CEO…
Better CEO performs masterclass in mishandling layoffs
A company that promised to improve the mortgage application process has recently laid off 900 people, with CEO Vishal Garg insulting them on the way out and threatening the employees that were remaining. Garg even went as far as posting on anonymous message boards to argue his case.
The company was valued over $7 billion at the beginning of 2021 and still has 9,000 employees. Fortune’s coverage, led by Jessica Mathews, has followed this story from the start of the layoffs, to reporting on the method of the layoffs, as well as Garg’s apology and recent decision to take some time away from the company.
At least Garg gets to go back to his job at some point, and probably isn’t dealing with financial instability during an ongoing global health crisis. This, like the recent layoffs at Zillow, could have been managed a lot better by a company that has the money and know-how to be smarter about these issues.
One Good Idea
Show some love to your customer-facing teams this holiday season
I spent the first four years of my career in B2B sales, first as support staff before two years as a quota-carrying rep. My respect for this work is undying and its importance to company success is undeniable.
This time of year can be stressful, even if sellers are at goal. In a year and time where things are so crazy, I’m sure even the best sales pros are at a point of exhaustion as they look to close out the year strong. Board members and executives can support the cause by joining sales calls, buying breakfast or lunch for team members, or calling out their success in public and company-wide forums, just to name a few ideas.
The exhaustion this time of year can be even worse for customer service teams, who are often fielding calls from very angry people. Today, we know that supply chain delays and many other factors may be delaying or hindering service, but that won’t stop people from calling angrily to vent at service reps, who often have no responsibility for those issues but need to solve them.
Keen, a footwear company based in Portland, Oregon, is giving its entire 22-person customer experience team time off from the early-December through the end of the year. They are mostly relying on outside vendors to complete the work during this time. The Modern Board will follow up with Keen to learn more about the experience and how it helped with staffing and morale during a challenging time.
Numbers that matter
205
The number of public companies in California that are still not compliant with the state's board gender diversity rules by the December 31st, 2021 deadline, according to the nonprofit 50/50 Women on Boards (50/50 WOB). The list includes Zoom, Tesla, Skechers USA, DoorDash, McAfee, Robert Half International, Activision Blizzard, and VMWare.
The financial penalties these companies are facing from the state are not significant. But perhaps they will also feel an impact in labor and consumer marketplaces for failing to catch up with their peers on this important directive, and that could be significant.
