Pandemic Darlings No More

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By: Peter Lauria

The business world can sure be unforgiving—just ask those folks in the corner office.

After leading firms through a brutal once-in-a-generation event, CEOs and other top leaders are discovering that their biggest stakeholders are losing patience with the less-than-stellar quarterly results and sinking stock prices that most companies have endured through much of 2022. According to the latest data, CEO turnover rose 8 percent from a year ago, and hit its highest level since 2019. And while some leaders left of their own accord to retire or take another role, the majority of the more than 800 departing CEOs were removed, the figures show.

All of which suggests that the two-year so-called “free pass” corporate leadership received from their boards and investors to navigate through the pandemic has come to an abrupt end. During the pandemic, companies were dealing with so much chaos and tragedy that they needed leadership continuity, says Michelle Lowry, professor of finance and academic director of the Gupta Governance Institute at Drexel University. “Now that they have navigated through the pandemic, many boards and investors have the view that the ship is upright, but it isn’t moving fast enough,” says Lowry.

To put it another way, the depressed economy has opened the door for boards and activist investors to remove underperforming CEOs or leaders without the skill sets needed post-pandemic. Activist-investor campaigns, for instance, are on the rise this year, as is focus on CEO compensation, with investors casting a higher percentage of “no” votes on say-on-pay. At the same time, board directors are facing as much scrutiny as company management is from investors and other stakeholders. Tanya van Biesen, a senior client partner in the Global Board and CEO Services practice at Korn Ferry, believes outside pressure on director performance could play a role in the rise in CEO turnover. “Directors are concerned about the support they have from shareholders,” she says. “They want to avoid being exposed or dinged for lack of oversight.”

Lowry contends that CEO turnover isn’t rising, just that it is simply normalizing after being unusually depressed because of the pandemic. “We’ve had one or two years of lower turnover, so this could be nothing more than a catch-up period,” she says. The purpose movement could be playing a role as well—one positive result of the increase in CEO turnover is that the number of women replacing male CEOs is at its highest level ever. Through July, female leaders replaced males as CEO in 127 instances, a 6 percent increase over 2021, when 119 did so, and more than the total number in each year from 2014 through 2017. Another possibility could be that CEOs are experiencing the same kinds of stresses and anxiety as their employees and reacting similarly by resigning or retiring.

Those factors, however, mask one undeniable truth: accountability is on the rise. Joe Griesedieck, vice chairman and managing director for Board and CEO services at Korn Ferry, says investors don’t care that a CEO can’t control the economy—they seem to have a new normal for judging the person holding the top job. “CEOs are worried.”

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