
Why C.E.O.s are getting fired more - janeboo
http://www.newyorker.com/magazine/2016/11/07/why-c-e-o-s-are-getting-fired-more
======
lordnacho
It's the same short-termism you see in the sports world.

Every season starting around now, the top clubs in Europe will start to fire
managers who aren't performing well. Despite the fact that a soccer team is
something that has a bit of momentum and can't be changed all that quickly.

You then hire a new guy, and you have to pay a premium. For one, there are
fewer people available because you're in a hurry. For another, any new guy
will see there's a risk of getting canned, so he'll want more money to
compensate. And finally, you'll have painted yourself into a corner because
you need someone who is perceived to be better than the guy you just canned.

\- The board members live off being board members. So just like analysts at
banks, they herd together. Nobody is going to stick their head out on a
candidate who is not like what they think everyone would want.

\- There's an illusion of control. The idea that you can change outcomes
predictably is a big problem. This guy will turn around sales. That guy is
better with people. The reality is such judgements are quite blurry and likely
to be spectral rather than binary. And a lot depends on environment.

\- Desperation for action. If things are going badly, something must be done.
This is something, so it must be done. (Yes Minister). This is another area
where an understanding of statistics would help. Your team/company's losing
streak is utterly natural. Replacing the guy at the helm when you get a streak
is just likely to cause the next guy to get undeserved credit (which
reinforces the cycle).

~~~
ythl
> Desperation for action. If things are going badly, something must be done.
> This is something, so it must be done.

I see this in politics a lot. If things are going badly (another "mass
shooting" happens), something must be done. Even if the solution is crap (ban
"assault weapons") it is something, so it must be done.

~~~
plurinshael
Given that we cannot provide free or extremely inexpensive mental health care,
or somehow get 340mil Americans not to behave like jackals and crass
narcissists all the time, to actually treat each other with respect, dignity,
and compassion, I do not see how banning assault weapons is a "crap" solution.
Sure, other guns may still be available but at least it's _something_.

~~~
saiya-jin
Disclaimer - never owned a gun, in fact never shot a proper one. The problem,
among others, is definition what is assault rifle and what not. Military
laughs at this definition coming from politicians, you can perform deadly
assault with pencil, bow or a brick.

Is it ammo type? (ie 5.56 or .308 - but these are also common hunting
calibers). Is it magazine capacity? - this can be cheated around super easily,
especially if you prepare something nefarious. Full automats aren't sold
anyway. Is it shape of the weapon? Now we left the land of facts and walking
in the emotional wonderland. We can do better.

It's like some voices here in Switzerland stating military home-held guns
should be banned because some people commit suicide with them. Yeah, let's
forget the core suicidal issue and remove the tool, that will surely stop
them, right?

Guns don't kill people (and don't get sentenced for that), people pull
triggers and kill other people. But that's much harder to fix, so let's find
some easy scapegoat, right?

~~~
JustSomeNobody
> ... you can perform deadly assault with pencil, bow or a brick.

I'm not saying we shouldn't ban certain guns, but I don't think people realize
that if someone is hellbent on killing, they'll use a hatchet or a machete if
they can't get a gun. We'll have fewer deaths, but much, much nastier ones.

~~~
oblio
> We'll have fewer deaths, but much, much nastier ones.

How do you quantify "nastier"? I couldn't really say.

Meanwhile, I can quantify "fewer deaths". And I'd try to achieve that first.

~~~
JustSomeNobody
I don't think getting hacked to death would be as clean a kill, generally, as
being shot. I've never witnessed either happen, so I could be wrong.

------
totalZero
CEOs have long been fall guys. They go into the job with an expectation that
if anything goes wrong, they will need to fall on their own sword to absorb
accountability. That's why termination packages are stupidly generous...
leaving the job is often part of doing the job.

~~~
chiph
The old joke about "Prepare three envelopes" has a lot of truth to it.

------
qwrusz
The real news should be _Why CEOs Aren 't Being Fired Fast Enough_

When bad CEOs do get fired, you often hear 'finally, what took them so long to
rid of that guy' and not 'aww, guy just got there, the board should have given
him a longer chance'[1].

The upswing in stock price following a forced CEO turnover may be seen as
corroborating this sentiment.

Why are poorly performing CEOs not being replaced quicker when corporate
boards _with a fiduciary responsibility_ have more than enough evidence he/she
is not the right person for the job?...

[1] Ron Johnson is the only recent example I can remember where I heard maybe
a couple people say that felt fast.

~~~
Bartweiss
I don't think we should see those things as mutually exclusive. I might
combine the arguments as "CEOs should be fired for personal performance, not
corporate or economic upheavals."

Stumpf left Wells Fargo over a debacle he neither created nor directly
managed. Certainly, over something less visible and attributable than Cordiner
at G.E. There's no particular reason to think that the new CEO is more
qualified to reform incentive structures and security precautions than he is,
so it was just a changing of the guard to show that something was being done.

Meanwhile someone like Ballmer was ousted about a decade after the industry
had decided it was necessary. I knew college students who swore they wouldn't
work at Microsoft until Ballmer left, and that was _years_ before he finally
did. Even if you feel he did a good job, it's pretty undeniable that his
presence was toxic to Microsoft's reputation and ability to recruit. And yet
he only left when Microsoft's problems became undeniable and 'new blood' was
needed to buoy the share price.

To me, the most consistent narrative is that boards fire CEOs when a problem
becomes so public that they need someone to hold responsible. That means both
ignoring incompetence if things are running uneventfully, and ignoring
competence (or reasonable ignorance) when a scandal comes through.

~~~
r00fus
> Stumpf left Wells Fargo over a debacle he neither created nor directly
> managed.

Cite needed. Right now it's completely not clear, except that widespread,
clearly illegal activity happenend on his watch.

I think it's ridiculous to compare Stumpf with Ballmer who simply wasn't as
good as he could have been - he increased profits during his tenure, and to my
knowledge, did not preside over shady activity (in contrast to Bill Gates who
was happy to "knife the baby" of his competitors).

------
OliverJones
This seems to be a return to accountability from the excesses of the oughts
(the 2000s).

It's guys like Ken Lay (Enron) and Rich McGinn (Lucent), not to mention John
Stumpf (Wells Fargo) who set up the expectation that executives should be
freewheeling, and that living high was the best way to signal to shareholders
that the company was in good shape.

The days when the CEO drove himself to work in a Buick and showed up in a
rumpled suit just off the red-eye at customer offices when there were problems
delivering value seemed to have faded away.

Anybody pulling down a seven-figure salary ought to be wise enough to salt a
lot of it away. Baseball players and bigshot executives are both out there on
the firing line. When they stop delivering their expected value, they should
expect to be cut. Reversion to the mean makes this more likely than not for
superstars.

It's entirely positive that shareholders are paying attention to one of the
biggest expense items - exec compensation - in their companies' budgets.

It would help if shareholders were better at understanding long-term
strategies. A good CEO (Jobs, Apple; Musk, Tesla; Welch, GE) is capable of
persuading them.

------
kogepathic
Perhaps this is a contributing factor to the insane compensation American CEOs
receive?

The new CEO refuses to work for less than the old one, and the company has to
offer the new person an incentive to join as CEO.

Couple this to the fact that CEOs are fired more frequently, and you get to
the number CEOs are paid now?

~~~
cmdrfred
Sounds like we have a CEO shortage. We should H1B some over here ASAP.

~~~
harryh
You sound like you're joking but it's true. There are a shockingly small
number of people who are really capable of being a CEO of a large (or even
medium sized company) and doing it well. It's an insanely hard job.

And two of the biggest tech CEOs (Sundar Pichai of Google & Satya Nadella of
Microsoft) are immigrants.

~~~
kesselvon
The people that parrot this line are usually CEO's themselves, or people
angling for the job at some point. I am amused about how CEOs take credit for
successes but failures are always driven by external factors out of their
control.

The reality is that CEOs are as good as their underlings, as they do all the
real work and advise the CEO. For that matter, CEOs probably shouldn't be
pulling 100x earning multiples compared to their 'normally' paid employees.

~~~
hnal943
People with your line of thinking are usually IC's who discount how difficult
leadership is. How do you affect change without having to do everything
yourself? That's a valuable skill.

~~~
blocktuw
"Do this or you're fired" will typically get those below you to produce the
change you desire. Not sure how you can put that much value on a skill inherit
to a hierarchical organization.

If the organization was flat, then I would concede your point that affecting
change without any seniority would be difficult and worth extra compensation.
A true leader would need to be persuasive, knowledgeable and visionary.

What you describe as "leadership" is people doing their job.

~~~
harryh
_" Do this or you're fired" will typically get those below you to produce the
change you desire._

LOL. If this were true it would be so much easier. But talented employees, who
can easily get another job across the street, are more likely to laugh at you
then do what you want if you talk to them like that.

~~~
cmdrfred
"Robert we have to complete this report by Thursday" == "Robert work overtime
to complete this report by Thursday, or you will be fired"

So the main skill of a CEO is he can ask nicely?

~~~
harryh
(We've gotten a bit off topic this deep in the thread. At this point we're
really just talking about general management skills which really isn't a big
thing for a CEO of any reasonably sized company. That being said....)

Robert: Sorry I can't work late this week. It's my kid's birthday tomorrow.

~~~
cmdrfred
Boss: "Robert isn't a team player, let's contrive a reason to fire him so we
don't have to pay unemployment."

~~~
harryh
Back in the real world it's not unemployment that you're gonna worry about.
It's how much severance you're going to pay him. Somewhere between 1 and 3
months. Which he'll use to take a nice vacation and then easily go get another
job whenever he's ready.

And you'll be down a talented employee that's hard to replace.

Nice work!

~~~
cmdrfred
What's your alternative? "Gee, Robert you have such pretty eyes... please do
this report?"

Intelligent, talented people don't fall for that kind of stuff in my
experience.

~~~
harryh
You have to create an environment where Robert wants to do it before you even
ask him.

~~~
cmdrfred
Honestly, this sort of non-quantifiable magic reminds me of Office Space.

"I have people skills! I am good with dealing with people can't you understand
that! WHAT THE HELL IS WRONG WITH YOU PEOPLE."

[https://www.youtube.com/watch?v=hNuu9CpdjIo](https://www.youtube.com/watch?v=hNuu9CpdjIo)

------
user5994461
I personally don't get the point of having the CEO in most big companies.

Noone knows who it is. Noone has ever heard anything from him. Noone would
even recognize him as CEO if he messaged or talked to them.

~~~
Forge36
How big are you talking? I know my CEO. But at 10k we aren't "big" compared to
Microsoft or Apple.

~~~
nickpsecurity
It's opposite in my company. It's a Fortune 100 company where almost nobody
knows the CEO since we never see him, rarely hear from him, and don't care
since he has little impact. The workers, from offices to production, run our
company with senior management just taking credit for or higher pay from all
that. CEO showed up once for some red carpet treatment, speeches, and food but
that's it.

~~~
jonwachob91
Then why not leave?

If you are really producing the effort that makes the company successful I'm
sure you could easily get a job somewhere else that'll pay you better and give
you better support from up top...

~~~
nickpsecurity
Overqualified or underqualified most local firms say. My area has few jobs.
Just hard to transition. Ill probably move haha.

------
SamUK96
I agree with other posts.

It's the increasing prevalence of short-termism.

Most companies in the world now are going through a big consolidation process
on a scale unheard of in the past, in preparation for when things go very bad
in the near future due to several accumulating factors.

This means is that companies are increasingly _designing_ themselves to be
sold; to be valued higher, so that when they get bought by the biggies, the
'Boys Club' (Seniors, Chiefs, etc.) get more money in the end.

This means companies are acting more for the quick sell rather than having any
kind of long-term plan for the future, and this means that a C.E.O.'s world
view and opinion and plan for the company quickly become outdated and left
behind, in favour for short-term company valuation increases.

Also, one way of increasing your company's value is changing C.E.O.'s more
often, since it shows your company is "pro-active" and "progressive", and gets
you in the news a lot.

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myf01d
The funny thing is that the growth or decline of a big company rarely depends
on the performance of the CEO who gets paid by millions at most cases. It
mostly depends on the current status of the market.

~~~
harryh
Part of the job of a CEO is to make sure a company is executing in the right
market.

------
DrNuke
No AI / bot CEOs yet? Come on...

~~~
hnal943
Some CEOs report to a bot:

[http://observer.com/2014/05/v-c-firm-names-robot-to-board-
of...](http://observer.com/2014/05/v-c-firm-names-robot-to-board-of-
directors/)

------
fourthark
If there were fairness in the world, bad CEOs would get demoted instead of
fired. Make them clean up the mess they made.

------
yuhong
I really wish the restrictions can be reduced or removed so board of directors
(like @pmarca) can tweet more on public companies.

