Some CEOs and their boards fight like cats. And if the CEO is fired as a result, they rarely come out looking good.
Take Steve Jobs’ firing from Apple. Jobs was not just any CEO – he was one of the two Steves who cofounded Apple in 1976. Alongside Steve Wozniak, he built Apple up from a garage, but was fired by the board in 1985. Eleven years later, he would be asked to return and rebuild the company.
Jobs later admitted that he deserved to be fired – “It was awful-tasting medicine, but the patient needed it”. He had the personality of sandpaper, and would often refer to his employees' work using four-letter words. The two Apple products he spearheaded before his firing, the Lisa and Macintosh, underperformed in the market, with the Lisa computer doing so badly that the company buried 2,700 of them in a garbage dump to get a tax break. The MacIntosh was slow as a snail: a stingy 128K of memory meant that you were in for a long wait just to save a file.
OpenAI CEO Sam Altman’s firing earlier this month was a very different case. Here it was the board that looked unreasonable and bizarre, as it failed to give a clear reason for pushing Altman out. Soon enough, nearly all of OpenAI's employees threatened to resign, and on twitter Sam received hundreds of heart emojis from his former employees, a love-fest that ended with his triumphant return as CEO.
Sam Altman’s case may be the rarest of the rare, where a company board got rid of its CEO because he was being too ambitious, too aggressive, in pushing AI into new frontiers and courting investors. Usually, when CEOs are fired, the cause is very different. We take a look at the circumstances under which some US and Indian leaders were pushed out in recent years.
In this week’s Analyticks:
In the hot seat: When CEOs are sent packing by their companies
Screener: CEO exits in 2023
In reality, CEOs are not easily fired
When fundamental disagreements over strategy and business rise up between boards and CEOs, they are hard to bridge. But in many of those cases, a CEO will just resign. A firing usually needs more reasons than that. A sample look at CEO firings across US and India, suggests that the bar to push a CEO out tends to be high.
In a few high-profile cases, like Cyrus Mistry at Tata Sons and Bob Chapek at Disney, the firing was a result of underperformance and disappointing results. Cyrus Mistry’s firing was in part, driven by his fumbling of an ongoing dispute between Tata and telecom company Docomo. Bob Chapek was fired from Disney after a disastrous October 2022 quarter, when the company blindsided investors by missing both its revenue and net profit estimates, and reported $1.5 billion in losses in its streaming division.
Fraud is another major theme in CEO firings -- from the payments scandal at US company Groupon, to the exit of BharatPe's CEO Suhail Sameer, after serious fraud allegations against co-founder Ashneer Grover. Brightcom MD Suresh Reddy was similarly forced to exit the company this year in August when a government inquiry discovered siphoning of funds and roundtripping.
Sexual assault has emerged as another factor over the past decade. Between 2014 and 2020, the #MeToo movement burst into public view, toppling several CEOs. Besides the infamous Harvey Weinstein scandal, sexual assault allegations also unravelled the careers of Dov Charney at American Apparel, Sean Rad at Tinder and Travis Kalanick at Uber. In India, Binny Bansal got pushed out of Flipkart after an assault allegation came to light.
Altman, Jobs, Dorsey: When do fired CEOs return?
In some cases, the board and a fired CEO make up. Sam Altman returned to OpenAI within a week, in record time. Jack Dorsey was fired from Twitter by the board in 2008 due to underperformance, but returned in 2015.
The most famous example of the returning CEO is probably Steve Jobs. Jobs returned to Apple eleven years after his firing, to turn a struggling company into a money-making powerhouse. A pattern emerges in all these cases of a fired CEO's triumphant return: all three were company founders. When businesses lost their way, they turned back to the original founder for guidance. And while Jobs oversaw a successful turnaround, in the case of Dorsey, Twitter continued its struggle to find a successful business model even after his return.
Does a high-profile firing ruin a CEO’s career? In the war of words and press releases that follow a CEO's firing, the board rarely loses. Mistry tried to restore his reputation via a legal fight with Tata Sons, which he lost. Steve Jobs' star didn't rise again until he was back at Apple.
Even in the case of OpenAI -- Sam Altman would have likely thrived at Microsoft, but he would have no longer been calling the shots. No matter how senior you are, leaving a company under a cloud means that a lot of opportunities go underwater.
Screener: Exits of top management in 2023
Suzlon Energy leads in one-year change% post its CEO’s exit
In this screener, we take a look at the one-year change and quarter change of companies that witnessed resignations from their Chief Executive Officers (CEOs) and Managing Directors (MDs) in 2023.
Stocks from the banking & finance, consumer durables, software & services, utilities and chemicals & petrochemicals sectors show up in the screener. Major stocks that appear in the screener are Suzlon Energy, Lloyds Metals & Energy, Praveg, RattanIndia Power, Orient Electric, Allcargo Logistics, GRM Overseas and Brightcom Group.
Suzlon Energy has risen the most, by 413.9% over the past year, despite its CEO, Ashwani Kumar resigning from his post on April 5. This move came after the company’s revenue fell by 9.3% YoY to Rs 1,464.2 crore in Q4FY23. Since his resignation, the company has witnessed strong growth in its net profit and revenue in Q1 and Q2FY24, owing to order wins.
On the other hand, Brightcom Group has fallen the most, by 54.2% over the previous year, amid its Managing Director, Suresh Kumar Reddy, resigning on August 8. This exit came after the Securities and Exchange Board of India (SEBI) barred Suresh Kumar Reddy and the Chief Financial Officer (CFO), Narayan Raju, from continuing in their positions. The board had found irregularities in the company’s preferential issue of shares and other suspicious activity.
You can find more screeners here.
