CEO departures pose varying challenges to outreach plans

Though only two months into the new year, a number of well-known CEOs have already stepped down from their posts.

Though only two months into the new year, a number of well-known CEOs have already stepped down from their posts.

Eric Schmidt, CEO of Google, recently announced he would be voluntarily exiting the top role at the company next month. A second medical leave of absence was revealed for Apple CEO Steve Jobs. And Ian Read, the new CEO of Pfizer, has begun his transition, replacing former head Jeffrey Kindler, who abruptly and unexpectedly departed the company at the close of 2010.

CEOs will continue to come and go under a variety of circumstances, but the challenge remains with the corporate communications teams to alleviate the sense of uncertainty and fear from the affected employees, shareholders, and the public.

John Kristoff, VP and CCO of Diebold, has dealt firsthand with a number of different types of CEO turnovers. In December 2005, Diebold's board prompted the resignation of its then CEO Walden O'Dell when the company's electronic voting business came under fire. Kristoff has also been involved with a CEO retirement, as well as a tragic incident when the company's COO was killed in a plane crash in 2003.

Degrees of difficulty

"Retirement is a little easier to plan for because the CEO who is retiring generally announces it six months or so in advance," explains Kristoff. "There's a transition period to get the new CEO out in front of investors, employees, and customers, and it's usually a side-by-side kind of a thing. People can have time to get comfortable with the new CEO before the current CEO completely steps away."

When it's an unexpected departure, such as those prompted by the board's urging or a tragedy, he says, there's much less visibility and time, and the problem will likely have come from a CEO whose persona is much larger than the company's.

"It's all about the company's brand," Kristoff adds. "We've always - and we have the support of our CEO in doing this - tried to get more of our senior executives in front of the media, our customers, and our investors. It's not a one-man show. It's a team effort all speaking to the corporate brand."

In 2010, 1,234 CEOs announced their departure, up seven from 2009, according to Challenger, Gray & Christmas, a recruitment consultancy. The tracking study cited healthcare as the sector with the most turnover last year, with 201 exits, followed by government and nonprofit at 159 and financial at 124.

Many agencies and corporations say they are seeing an uptick in firings in particular because boards are taking on a higher level of accountability.

"Boards have come under a lot of criticism over the past couple of years for not being diligent enough," says Scott Chaiken, CEO of Cleveland-based Dix & Eaton. "Some of the regulatory reform is really forcing them to be more diligent. And if a company's board has directors on it, who are basically shareholder representatives, the CEO is more likely to get fired."

In 2010, Challenger, Gray & Christmas reported that 26 CEOs were fired or removed, nine left amid scandal and four exited because of pressure from the board, versus 25 CEOs leaving under similar circumstances in 2009. Notable 2010 oustings included Mark Hurd at HP and Randy Michaels at the Tribune Company.

Diebold has a non-executive chairman and a CEO, who's not chairman of the board, for objectivity. In addition to boards having more power, Kristoff says, they also have more liability.

"There's also the whole upswing in shareholder activism, where you get an aggressive shareholder into your stock and they threaten to take out board members if there's not a change in management," he adds. "That's obviously on the rise as well."

Changes on the board

Helene Solomon, CEO of Boston-based agency Solomon McCown & Co., also points to the changing demographics of boards as a key component. What was once "an all-boys network," she says, "has now become a strong mix of backgrounds and voices who play an important role in all kinds of major issues, certainly in governance and succession."

While it's easy to prepare messaging for a retirement announcement beforehand, Solomon adds that it is neces- sary to have a basic process fleshed out ahead of any CEO succession circumstance.

"There's a triggering event or it's the straw that broke the camel's back," she explains. "Ideally, in that instance, there's a plan sitting on the shelf that may not have all the blanks filled in, but at least there's a road map for a process to have a full successor and an interim successor. In all those instances, it starts with a timeline and messaging."

Reasons for CEO exits in 2010

Resigned/ stepped down 592

Retired 306

Took a position in another company 154

Interim period ended 81

Removed 26

Died 21

Economic conditions 16

Acquisition/merger 16

Scandal 9

Health 6

Pressure from board 4

Bankruptcy 2

Funding loss 1

Source: Challenger, Gray & Christmas

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