Unilever recently announced the unexpected replacement of its CEO, Hein Schumacher, after just 20 months in the role. The company's chairman, Ian Meakin, stated that while Unilever's 2024 performance was satisfactory, achieving industry-leading results remains a challenge. Fernando Fernandez, the current CFO, will take over, bringing a sense of urgency to realize the company's growth potential. This decision reflects a broader trend on Wall Street, where urgency is becoming a key factor in leadership changes.
Boards are increasingly pressured by impatient shareholders to act swiftly if CEOs do not deliver rapid results. This has led to a notable increase in CEO turnovers, with more being dismissed or forced to resign in 2024 than in any year since 2017, according to exechange.com. The average tenure for departing CEOs in S&P 500 companies has dropped to 8.3 years, the lowest since 2017.
Several high-profile CEO departures in the past months include Bernard Kim from Match Group Inc., David Kimbell from Ulta Beauty Inc., Patrick Gelsinger from Intel Corp., Karen Lynch from CVS Health Corp., Laxman Narasimhan from Starbucks, and David Calhoun from Boeing. These changes are partly due to boards becoming more actively involved in company affairs, a shift accelerated by the Sarbanes-Oxley Act of 2002 and the COVID-19 pandemic.
This trend is more pronounced in larger companies, with S&P 500 firms seeing a higher rate of forced CEO departures compared to S&P 600 companies. The larger the board and the higher the directors' expertise, the stricter the accountability for CEOs.
However, changing CEOs is not a guaranteed solution to a company's problems. For instance, Boeing continues to face challenges despite leadership changes, and Starbucks saw declining sales under new leadership. Patience is often required for successful turnarounds, as demonstrated by Brian Niccol's transformation of Chipotle Mexican Grill Inc.
In conclusion, the urgency-driven approach in corporate leadership reflects a fear of missing out on opportunities due to inadequate leadership, prompting boards to act swiftly in changing CEOs.
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