It is proxy season and as public companies put out the lists of compensations for their CEOs it is plain that the recession did not damage chief executive pay packages in most cases.
New research shows that the recession was unkind to some CEOs who have recently lost their jobs as part of an epidemic of firings. Employment consulting firm Challenger, Gray & Christmas said that 132 CEOs lost their jobs in February. The figure is a 17-month high and 89% higher than the number for January
There are two explanations for the job losses, and neither of them is adequate. The first is that companies with chief executives who could run their firms during the brutal recession are not qualified to lead them through a period of growth. That assumes that many companies brought in a “recession” CEO and then decided to switch to a “growth” CEO as the economic climate improved. The CEO business does not work that way and many companies have had the same chief executive for several years, which means that they were in place before, during, and now after the recession. Business management is not like baseball with a set of right and left-handed relievers. Good management usually has the skill to manage in a broad spectrum of economic conditions.
The other theory about why company boards are firing CEOs now that the recession is over. There was too much risk to sack chief executives during the worst of the economic storm. It is better to wait until things are good enough to allow a company to take a gamble on a new leader. Of course, the new leader will probably look a good deal better than the old one because it is easier to produce strong results in a recovery.
It may be that the relief that comes with the end of such a long and difficult downturn also causes a catharsis. Boards may find it difficult to stick with someone who may have been blamed, often inappropriately, for a company’s poor performance when the economy was actually the cause of the faults, or to face someone who laid-off hundreds of people. Firing management really does not wash away the worst of what happened in the recession. It just seems that way.
Douglas A. McIntyre
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