The best way to handle trouble at a company during a recession is to dump the CEO. Someone probably keeps statistics on whether chief executives lose their jobs faster in a downturn than in more pleasant periods.
Over the course of the last 24-hours, the heads of Borders Group (BGP) and Tyson Foods (TSN) were sacked. Two weeks ago, the CEO of AllianceBernstein (AB) was one in a long line of financial company chiefs to be pushed out.
Is there any real value to firing most of these people?
Many executives brought in to replace a CEO the board has dumped probably need three to six months to find out how the company runs and which managers are competent. Some of the new chief executives are the wrong choices. That leaves many companies with one CEO gone and another who is a boob. In the meantime, the recession may have beat the firm up more, and the time to fix the problems which have to be fixed to save the place may have passed.
Most of the CEO-during-a-recession issue rest with boards. Bad performance means someone is at fault. The top guy is a good target. But, moving in someone new is not always a solution.
Borders Group sells books, mostly though retail outlets. People don’t go to bookstore much anymore. They get their books online or spend their time playing video games and don’t read at all. The head of AllianceBerstein had been at the company for 40 years. He was replaced by an executive from Merrill Lynch who was probably about to be fired.
If a company has problems driven by the markets and not management, replacing a CEO just digs a deeper hole.
Douglas A. McIntyre