Emergency CEO successions

November 04, 2014

Emergency CEO successions

The death of the chief executive of Total in a recent plane crash led to an article in the Financial Times by Andrew Hill about the sudden impact of CEO death. Hill points out that research by The Conference Board advises boards to be prepared because approximately 7 to 15 US public companies lose a CEO due to sudden death annually. Although companies might not think the odds are high enough, it happens and pure chaos erupts. As cited by Hill, research by professors from Stanford, Insead and Columbia found that in the year following an emergency succession, companies suffer an 18% decline in operating profitability. One of the best parts of the article for someone like me who likes to gather information was the table below which lists emergency CEO successions, the number of days until a replacement was found, the causes behind the succession, and share price change. The chart was compiled by Stanford Graduate School of Business.

One of the comments to the article had an important insight — 50% of the CEOs died from a heart attack and the need for better medical checkups of these individuals. I also noticed that 75% of the successors were internal candidates which seems to indicate that a successor was in place, perhaps not ready but identified. Only two were under 50 years old (from a plane crash and overdose). All men (no surprise). The greatest stock decline (- 12%) on the day of the loss was for Herbalife whose 44 year old CEO had been at the helm for 20 years. Clearly a catastrophe for the company on many fronts. 

Interestingly, Total has a memorial section on their home page which also provides a place for people to leave tributes. There are many. 

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Leslie Gaines-Ross
Leslie Gaines-Ross
lesliegainesross@gmail.com

As Weber Shandwick’s Chief Reputation Strategist, I focus on the ever changing world of reputation. For the past 25 years, I have relentlessly observed, researched and commented on the rise and fall of reputations.

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