Your CEO should be an adept, decisive leader. However, when a CEO underperforms, what results is often a long, tortuous termination that devastates shareholders. A protracted CEO termination is when a shareholders service group is so essential. At Kingsdale Advisors, we are the leading advisory firm in Canada, and we have proudly worked with innumerable well-known companies across North America. Since 2003, we have provided seamless execution and an unrivaled ability to maximize shareholder participation and outcome.
Here is how slow CEO terminations impact shareholders:
An underperforming CEO who cannot execute often camouflages their lackluster performance by relying on a strong market and delivering shareholder returns.
This obfuscation is when a shareholders service group is critical. It’s not until the illusion of shareholder returns and market performance is dispelled that shareholders and boards take action. Shareholders mobilize against directors who reject responsibility for poor CEO performance.
The termination of an inadequate CEO galvanizes shareholders, and this motivation even inspires them not just to reclaim their agency and power, but to utilize it. In recent years, 23 board-related proxy contests have been launched. One-third included or produced a CEO replacement within a year.
Moreover, a slow CEO termination rankles shareholders differently. It elicits feelings of inequity and injustice. Shareholders start feeling like CEOs are not invested enough to take the job seriously.
Ultimately, shareholders are looking for CEOs who perceive their position as more than a vocation; they want someone as committed as they are.
CEOs who are also the founders of companies have become especially exposed. This vulnerability is when a shareholders service group is essential.
CEOs unable to adapt or keep pace with their burgeoning company and its innovation result in a misalignment with shareholders and their company trajectory. Growing companies can outgrow their founders and succeeding CEOs.
As a company grows, more sophisticated shareholders join the ranks. They often determine the founder is unable to provide any more value. The slow termination of an incapable CEO in these circumstances devastates the confidence and morale of shareholders.
When the time is ripe to terminate a CEO, the board must be decisive and quick. Unfortunately, boards can be hobbled by future uncertainty. The protracted termination of a CEO exacerbates this anxiety and apprehension and is further complicated by myopic planning.
Boards fail to terminate CEOs quickly and decisively when they have lost control. As termination is protracted, this compounds, making shareholders service groups increasingly indispensable.
Ego or a desire to remain passive and evade conflict factor in majorly, which signals a loss of control over their decision-making. When the board hires a CEO, it is typically ceremonious, and they exalt the new CEO as supremely qualified and capable.
The board and company perceive a newly hired CEO as the key player in their future success. However, terminating a CEO means reckoning with the truth that they were wrong, which may even cause people to scrutinize and question their ability to perform their job.
A CEO’s slow termination ultimately hurts performance and forces the company to scramble to find a replacement. In the end, this suggests the board and shareholders are not in control.
If you are currently enduring a slow CEO termination, Kingsdale Advisors can help expedite the process and reposition your company for success. We understand how much you have on the line, and we are committed to preserving it. Get in touch now to get started! We are the leading advisory firm in Canada, and our track record speaks for itself.
