So far in 2019, according to Challenger, Gray & Christmas, 1,480 chief executives of US companies of scale (10 employees / in business 2 years) have exited their posts. These numbers are the highest year-to-date through November since the company has been keeping track since 2002. Things seem to have accelerated over the last few months with 150 departures in November alone. We thought the following schematic from Yahoo Finance was particularly illustrative:
These have included many high profile and unexpected departures including:
- Kevin Plank, Under Armour
- Steve Easterbrook, McDonald’s
- Oscar Munoz, United Airlines
- John Legere, T-Mobile
- Larry Page, Alphabet/Google
- Mark Parker, Nike
- Adam Neumann, WeWork
Not long ago, Under Armour without Kevin Plank, WeWork without Adam Neumann and T-Mobile without John Legere would have been unthinkable. While it seems that CEO turnover has been increasing over the last few years and average CEO tenures have been declining, 2019 may be an inflection point.
Some of the uptick may be explainable, and long overdue. According to the data, roughly 32% of CEOs left unwillingly. Likely the direct result of greater scrutiny over CEO behavior and less willingness from corporate boards to overlook character flaws in the interest pursuing growth at any cost.
Still, fully 68% of CEOs left of their own accord. Could they be sniffing a coming downturn and be looking to exit while things are good? Could increased uncertainty related to the uprooting of historical trade and global supply chain relationships (US/China, Brexit, etc.) be too much to bear? Perhaps. Who can blame them after an 11 year bull market run – the party has to end at some point and most cannot substantially sell their meaningful share positions while they are still running the show.
That said, in our experience, CEO departures are rarely a good thing, especially for companies that have performed well during the departing CEO’s tenure. Certainly, we believe this trend merits closer attention.
The views presented herein are those of Validus Growth Investors, LLC (“Validus”) as of December 2019 and are provided for informational purposes only. There is no guarantee that any historical trend illustrated above will be repeated in the future, and there is no way to predict precisely when such a trend might begin. The information is based on the economic and market conditions as of this date. The information is not intended as a discussion of the merits of a particular offering and should not assume that any discussion or information provided herein serves as the receipt of, or as a substitute for personalized investment advice from Validus or any other investment professional.
This material is provided for informational purposes only and does not constitute a solicitation. The material is not intended to be relied upon as a forecast, research or investment advice and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any forecasts made will come to pass.