There are, of course, exceptions. Recently, we have seen seemingly smooth changings of the guard in the tech sector, with Microsoft CEO Steve Ballmer, Cisco CEO John Chambers, and Oracle founder Larry Ellison stepping down after 16, 20 and 38 years respectively. However, the far-less-tranquil succession pattern lives on. Examples abound in the personality-infused world of fashion. In 2013, Men’s Warehouse founder George Zimmer was ousted at age 64 by his board after 40 years as CEO. American Apparel’s Dov Charney, Abercrombie & Fitch’s Michael Jeffries and Lululemon’s CEO Chip Wilson were also unseated after stormy board battles. Each presided over years of sinking market performance, soaring salaries and conduct as bizarre as it was offensive.
Many feel that the short-term orientation of activists and metrics of proxy firms demand an unrealistically rapid learning curve from new CEOs. Research suggests that effective managers can require 18 months or so to navigate the taking-charge process. Yet, Fortune 500 CEO data shows a paltry median tenure of 4.9 years.
Terms range wildly, however. fully 20 of these CEOs have 20-plus years of service, and an additional 26 have been in office for at least 15 years. At the extremes, 84-year-old Rupert Murdoch has been CEO of News Corp for 63 years, Berkshire Hathaway’s Warren Buffett, also 84, has been in office for 59 years, 71-year-old Fred Smith has led FedEx for 42 years. At 91, Sumner Redstone has led National Amusements since 1967, with control over CBS and Viacom.
How does someone know the right time to leave—and how can boards ease the transition? While there is no universal recipe, in 30 years of research on CEO exits I have identified four dominant departure styles: Monarchs, driven by an elusive quest for a lasting legacy, either die in office or are toppled by a palace revolt. They are most common in family and small- to mid-sized
businesses, where the CEO is central to the identity and vitality of the business. They are often brilliant visionaries who believe there is only one truly indispensable person—and they know who that is. Boards must be sure to protect good successor candidates that the monarch sees as threats.
Generals leave reluctantly—and then stage a return. Often, they have the unrivaled credibility to make major changes in keeping with disruptive developments in the strategic context. Their challenge is to resist exaggerating a sense of crisis as a pretext to engineer their return to power.
Ambassadors function as wise elder statespersons. Examples include Cisco’s John Chambers, Craig Barrett at Intel, McKinsey Founder Marvin Bower, Eric Schmidt of Google or Bill Gates at Microsoft. They generally have an excellent relationship with an internally groomed protégé and can serve as mentors.
Governors serve a bounded term of office and seek new adventures elsewhere. These leaders are most common to larger enterprises. The challenge for their boards is to ensure that they don’t get diverted to new opportunities too soon or engage in fire-sale asset auctions to embellish short-term credentials.