October 8, 2019 All Industries
It’s not your imagination: CEOs aren’t lasting that long.
The recent news of scandal and bungled initial public offerings are only a handful of reasons why CEOs have lost their jobs. WeWork’s CEO and founder Adam Neumann resigned under pressure in September, following a similar end in 2017 for Uber Technologies founding CEO Travis Kalanick. WeWork delayed its IPO after executives reduced its market valuation from $47 billion in January 2019 to as low as $10 billion, as investors balked at the company’s mounting financial losses.
“Barely a week ago, Adam Neumann was sitting atop the most valuable startup in the U.S. and getting ready for a blockbuster initial public offering,” The Wall Street Journal reported. “Now he’s out of a job.”
However, it wasn’t all about money. There were questions about the company’s governance practices, too. Neumann owned stakes in buildings that WeWork leased. Also, But perhaps the most damning for investors was the fact that Neumann had supervoting shares that gave him a voting ratio of 10 to 1 over common shares and allowed him to maintain tight control over the company. Addressing complaints, the company pledged to appoint a lead independent director by the end of the year. It ended up slashing Neuman’s ratio of supervoting shares to 3 to 1, forcing him to cede control of the company but keeping him as nonexecutive chairman of WeWork’s parent company, the We Company.
Another CEO to recently lose the top job was Nissan’s CEO, Hiroto Saikawa. Saikawa was appointed CEO after the previous chairman, Carlos Ghosn, was arrested in an ongoing scandal. Prosecutors initially cited company data alleging Ghosn had substantially underreported his income, but later added other allegations.
Saikawa was accused of falsifying documents that boosted his compensation. This comes at a bad time for Nissan, which has experienced falling sales and earnings, leading to thousands of job cuts worldwide, according to CNBC. It also raises questions about board oversight. The Nissan board has responded by revamping its corporate governance structure, adding new board committees and independent, outside directors.
It’s unclear whether CEOs are behaving worse than prior generations of CEOs. But they are not lasting as long in their jobs as they did in prior years. According to a survey by research firm Equilar, the median tenure of CEOs at S&P 500 companies was five years at the end of 2017, down from six years in 2013.
Make no mistake: Scandal doesn’t always mean job loss. CEOs are losing jobs because of poor earnings and conflicts with the board on the direction of the company, too. It pays to stay out of scandal and follow the letter of the law, but that’s no guarantee of a job.