Email | Print    Type Size  -  +

CEO departures break record

The economic crisis forces heavy corner office turnover in 2008. Will successors learn from others' mistakes?

Jennifer Reingold, senior writer
Last Updated: January 16, 2009: 6:25 PM ET

jerry_yang_new.03.jpg
Former Yahoo CEO Jerry Yang was one of the 1,484 CEOs who moved on in 2008.

(Fortune) -- When the going gets tough, the tough get going.

Or get pushed.

So it stands to reason that in the toughest period for business in modern history, the number of CEOs leaving their jobs -- voluntarily or not -- has hit a record level. According to new data from Challenger, Gray & Christmas, 1,484 CEOs headed for the exits in 2008 -- which works out to an average of six every business day, the most since Challenger first began the survey in 1999. "CEOs are under intense pressure," says John Challenger, CEO of Challenger, Gray. "They have little room for error."

Yet while high-profile firings seem to draw most of the media attention -- some of this month's big ones include the heads of Seagate Technology and Tyson Foods -- Challenger's research shows that resignation was by far the biggest reason for an empty corner office this year, with 623 either retiring or "stepping down." Some of these are veiled firings, of course, but it is also highly possible that once-supremely confident CEOs actually feel as unqualified to lead their company through this crisis as many members of the public think they are (not to mention the fact that their pay has fallen dramatically for a job that has suddenly become a lot more difficult and a lot less glamorous).

What is even scarier is that fact that their replacements -- at least so far -- don't seem much better qualified to navigate these rough seas. In part, that's a function of age: No one currently in the work force was of working age during the Depression; no one has first hand experience with a truly global meltdown. But it's also because the executives who are still around seem to have fallen into a type of paralysis that prevents many of them from making the tough decisions that they need to make -- perhaps because they, too, fear getting canned or forced out.

Just look at an incredible tidbit from the latest in a series on the economy from consulting firm BCG, entitled Collateral Damage. In a study in early December 2008 of about 60 major companies worldwide -- long after the creation of TARP and the clear collapse in consumer confidence, mind you -- more than half of the companies had not made any significant changes to their strategic plans. On average, they were assuming no more than a 5% reduction in volume in a year that was already shaping up to be disastrous. "What is striking," the report reads, "is that, outside of the construction and auto industries, many companies are assuming that the crisis will have a very modest impact in 2009."

Say what? It's hard to believe that chief executives were still whistling their way to work in December 2008. What seems much more likely is that they simply didn't know what to do -- so did nothing at all. Taking risks, it appears, has gone from the measure of a chief executive's success to a dirty word, just as it becomes clear that standing still is the worst thing to do. Sydney Finkelstein, professor of Management at Dartmouth's Tuck School of Business and co-author of the new book "Think Again: Why Good Leaders Make Bad Decisions and How to Keep it From Happening to You" (Harvard Business Press), says that the executives he works with are falling into two different categories. "Some are saying they can't believe this has happened to me; it's one part denial and another part whining. Others are just facing up to the reality that this is going on and we have to do something about it. The difference in leadership is dramatic."

What all this suggests is that there will be even more leave-taking -- by design or by force -- this year than next. It also suggests that there is room to create a new role for the successful CEO; one who understands the relative powerlessness of the job in this volatile world and who has the guts to ask others for a hand. Large company executives might, therefore, look to the heads of smaller companies, who have long operated in a world in which they have little control over their own environments. Rafael Pastor, CEO of Vistage International, a CEO membership organization for heads of small and medium companies, says the number of CEOs joining his group, which provides 10 hours a month of meetings with peers to work together on business problems along with 2 hours of private executive coaching, has risen by 8% in the past year -- even with a charge of $15,000 to join. "People are reaching out for help," he says. What a concept. To top of page

Company Price Change % Change
Bank of America Corp... 16.15 0.00 0.00%
Facebook Inc 58.94 0.00 0.00%
General Electric Co 26.56 0.00 0.00%
Cisco Systems Inc 23.21 0.00 0.00%
Micron Technology In... 23.91 0.00 0.00%
Data as of Apr 17
Index Last Change % Change
Dow 16,408.54 -16.31 -0.10%
Nasdaq 4,095.52 9.29 0.23%
S&P 500 1,864.85 2.54 0.14%
Treasuries 2.72 0.08 3.19%
Data as of 3:48pm ET
More Galleries
50 years of the Ford Mustang Take a drive down memory lane with our favorite photos of the car through the years. More
Cool cars from the New York Auto Show These are some of the most interesting new models and concept vehicles from the Big Apple's car show. More
8 CEOs who took a pay cut in 2013 Median CEO pay inched up 9% in 2013 to $13.9 million. But not everyone got a bump last year. Here are eight CEOs who missed out. More
Sponsors
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.