7/29/2025
The Most Precarious Job in America's Boardrooms: CEO
Reuters (07/29/25) Herbst-Bayliss, Svea; Binnie, Isla
U.S. companies are removing their CEOs at the fastest clip in two decades, data shows, as increased scrutiny from shareholders and boards result in reduced tolerance for sub-par returns or wayward conduct. At least 41 CEOs have exited S&P 500 companies so far this year, compared with 49 for all of 2024 — making the fastest pace on an annualized basis since 2005, according to data from nonprofit executive research group The Conference Board and data analytics company ESGAUGE. In interviews, more than a dozen executive recruiters, investors, bankers, lawyers, and industry advisers attributed the high turnover this year to a range of reasons, some building up from economic and social changes since the Covid-19 pandemic. While high inflation, geopolitical instability and the Trump administration’s trade war has complicated the job of CEOs, diversity gains made boards more independent and demanding of the person in the top job, these people said. At the same time, in a stock market setting new records but driven mostly by large tech names, underperformance had given activist investors, who push for corporate changes from selling a division to buying back more stock, greater sway, leading to management changes. "Trying to fire the CEO has become a referendum on what's perceived to be a failed company strategy," said Peter da Silva Vint, managing partner at consulting firm Jasper Street, which works with companies facing pressure from activist investors. "And investors have become more comfortable with it as a mechanism to send a message." CEOs at companies that are lagging their peers are most at risk for demands from activists, with almost half — 42% — of S&P 500 companies that changed leaders last year foundering in the bottom 25th percentile for total shareholder returns, according to a November study by The Conference Board. Take the case of Kenvue (KVUE), where the board said it was replacing CEO Thibaut Mongon "to unlock shareholder value and reach its full potential" after the stock had lost 16.5% since its spin out from Johnson & Johnson (JNJ) two years ago. In contrast the S&P 500 has climbed 41% since August 2023, when Kenvue became a fully independent company. Kenvue took action after three U.S. hedge funds — Starboard Value, Tom's Capital, and Third Point — called for change at the company, and Starboard CEO Jeffrey Smith got a board seat in March to settle that hedge fund's proxy fight. The battle at Kenvue continues, however. The other two funds continue to call for more changes, including divesting assets and possibly selling the entire company, according to people familiar with the matter. With a new CEO on board investors, are confident a sale is sure to follow, the sources said. "Activist investors are feeling more empowered, and if they have bought into a company's five-year plan then they want someone to exercise it," said Georgetown University professor Jason Schloetzer, an expert in corporate governance. "And if the guy at the top can't do it, they'll find the next one." Beyond shareholder activism and performance, changes in the makeup of boards over the past decade when there had been a new focus on adding diversity was also playing a role in the shakeup at the top, corporate governance experts said. Such boards were acting with greater independence, putting CEOs on tighter leash, these people said. "Newer members have more objectivity relative to prior generations," said Jason Baumgarten, head of global board and CEO practice at executive recruitment firm Spencer Stuart. Meanwhile, reputational risk and corporate culture have become central to a company's long-term value, Jasper Street's da Silva Vint said. "Today's boards are far more willing to act decisively, removing executives, not only to enforce policy, but to protect shareholder, employee, and public trust," he said.
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