Yahoo Finance C-suite turnover happening at rapid rate, and here's why
CEO turnover has been hitting many of the biggest companies out there.
"This is a moment in which we are seeing an increase in CEO turnover," Christine Barton, BCG North America CEO advisory lead, told Yahoo Finance. "That said, you really have to de-average because the amount of turnover in, say, the S&P 500 has remained relatively stable over the last five years, with the exception of 2022, where there was a decrease. In the S&P 500, there was a significant increase throughout 2022 of external CEO hires."
The list of CEOs making their exits has grown massively in just the last week.
After an extensive search, PayPal (PYPL) announced that CEO Dan Schulman's successor would be longtime Intuit executive Alex Chriss. Meanwhile, Synopsys (SNPS) revealed a CEO shift this week, as Aart de Geus steps aside at the chip design tools company, making way for Sassine Ghazi to become president and CEO.
Kraft Heinz (KHC) CEO Miguel Patricio shocked the Street on Monday when he announced plans to step down. Patricio will be succeeded by insider US CEO Carlos Abrams-Rivera. Also last week, coffee chain Dutch Bros (BROS) named Christine Barone, who has served as president of the company since February 2023, to replace Joth Ricci as CEO. Both leadership changes are effective Jan. 1 of next year.
And in February, Restaurant Brands International (QSR) CEO José Cil announced the end of his term as chief executive and was replaced by insider Joshua Kobza.
This turnover is happening in large part because of the macroeconomic and societal shifts that have happened as the worst of COVID-19 subsided, said London Business School professor Randall Peterson.
"CEOs are changing over now because the situation has changed so dramatically in the last 18 months," he said. "We went from super low interest rates, learning to work from home, and a Donald Trump world to the highest inflation in 40 years, people relearning to work in the presence of others, and Joe Biden’s very different style. What worked to get [companies] through COVID will not work now. We’ve had just long enough post COVID to really start seeing that."
These C-suite changes tend to mirror changes in the wider workforce.
"In many cases, CEOs have taken very tough and necessary action to right-size their workforce and organizational structures," Keith Giarman, a managing partner at DHR Global, told Yahoo Finance. "When you add all this up, coupled with the overarching workforce trend of prioritizing work-life balance, these impacts are being reflected on to the C-suite level as well. Is it any wonder CEOs are not necessarily geared up for the next iteration of the market, regardless of how much money we are paying them?"
In particular, layoffs and CEO departures correlate over time, Challenger, Gray & Christmas senior vice president Andy Challenger said. Though "it's not always exact," he said.
"At the height of COVID, we saw huge numbers of layoffs, the highest we've ever seen, and we also saw very few CEO layoffs," Challenger explained. "That was kind of one of those moments where the trends diverged. Companies didn't want to let go of their leaders in the crisis, but they were letting employees go."
"Now, we're seeing them much more highly correlated," he added, "which I think is companies returning back to some sort of normalcy. ... They're bringing in leaders that are going to have a strategy that is going to work over this next period."
It's not just CEOs who have been getting the boot lately. Companies are reshuffling their C-suites in all kinds of ways.
For example, just this week Subway revealed Trevor Haynes, president of North America, would be leaving the company after almost two decades at the sandwich chain.
But these sorts of shifts can make for risky times.
"CEO change is always going to be a time of increased risk as new leaders tend to come in with less confidence than is ideal, and their priorities get reflected down the chain fairly quickly," Peterson said. "If the organization or specific people are hungry for change, then this will be welcomed. If things have been going well, change can feel threatening to that success. So when you destabilize the most successful people, that is a risky time."
Still, a new board-chosen CEO can offer some insight into where companies want to go.
There are benefits and drawbacks to choosing someone internally, as was the case at Kraft Heinz, or externally, as was the case at PayPal. External successors have grown increasingly common but don't always promise stability, BCG's Barton said.
"In terms of the composition of internal to external hires, within the S&P 500, we have seen material increases in external successors in 2018 and 2022," she told Yahoo Finance."Over the last five years, the highest rates of external hires occurred in 2018 and 2019. This could reflect improvements in succession planning by smaller companies as well as the desire to maintain stability and experience in the role in the face of increasing external volatility, complexity, and expectations of CEOs."
In the case of Dutch Bros, Ricci said the CEO transition started before the company went public in 2021.
"We were planning and executing the type of leadership and the leadership skill sets the company was going to need to really carry forward in the journey," Ricci said. "Bringing Christine [Barone] on was natural. ... Over the five years, we've created something that's now on a national stage and took it public and managed COVID, and I'm just really proud of how full the cupboard is what we can do to put our leadership in a great position to succeed for the future."
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