Traditionally, when companies face financial difficulties or underperform in the market, it’s the rank-and-file workers who suffer the consequences, often losing their jobs. This has created a perception that CEOs are somehow protected from the repercussions of their poor business decisions.
However, this dynamic is gradually shifting. Activist investors, keen on safeguarding their investments, are increasingly advocating for changes at the top management level to address financial issues and missed growth objectives.
As a result, 2024 saw an unprecedented number of CEO departures from companies targeted by these investors, with approximately 27 chief executives stepping down from their positions, a report by Barclays revealed.
Activist investors launched a record-breaking 243 global campaigns targeting corporate leadership. The United States saw a 6% increase, with 115 campaigns, while the Asia-Pacific region experienced a dramatic surge, nearly doubling its campaign count to 66.
Anticipating potential investor challenges, some corporate boards proactively initiated leadership transitions, strategically replacing executives before formal campaigns could be launched.
Elliott Management emerged as the most prominent activist investor, spearheading 14 high-profile campaigns that zeroed in on major corporations including Honeywell, Softbank, Starbucks and Texas Instruments.
“Looking back to 2024, it feels almost as if there was a shareholder revolt,” said Jim Rossman, global head of shareholder advisory at Barclays. “Investors are no longer willing to sit and wait for promised improvements and are saying, ‘We want the companies where we are invested to change right now.'”
In recent years, there’s been a noticeable trend in investor priorities, which continued in 2024. Rather than focusing on mergers and acquisitions, investors have increasingly emphasized the need for operational and strategic enhancements within companies.
Twenty-six percent of all investor campaign demands focused on improving strategy and operations, marking a significant increase from 19% in 2021. In contrast, only 22% of campaigns in 2024 called for M&A activities, such as selling off business divisions or putting the entire company up for sale.
Why The Sudden Surge In CEO’s Under Fire?
In the aftermath of the pandemic, businesses are showing greater readiness to shake up their top-tier management. This pivotal shift is driven by the necessity to keep pace with rapidly changing market conditions and meet heightened performance expectations.
Several factors are contributing to this acceleration in leadership turnover. The ongoing retirement wave of Baby Boomer executives coincides with unprecedented business challenges, including inflationary pressures and supply chain complications. This confluence of events has created a natural juncture for leadership renewal.
External forces are also shaping this trend. Activist investors have become more vocal and influential, often pushing for leadership changes when they believe a company is underperforming.
Additionally, the digital revolution has raised the bar for CEOs, who are now expected to be technologically adept and maintain a strong public presence. This new set of expectations has led some long-standing executives to step down rather than grapple with potential adaptation hurdles.
In this climate, many organizations are reframing leadership transitions as strategic opportunities. They see these changes as a chance to inject fresh perspectives and bring on board executives who are better equipped to steer the company through an increasingly complex business environment.
Notable Departures
The wave of CEO departures last year were spread across a wide range of sectors, including tech, automotive, retail, fitness and entertainment.
High-profile leadership changes occurred at major corporations. Starbucks replaced Laxman Narasimhan with Brian Niccol, while Boeing’s Dave Calhoun resigned amidst ongoing company issues. The tech and automotive industries were particularly affected, with both Intel and Stellantis undergoing executive transitions.
Several other prominent companies experienced leadership shake-ups. Paramount bid farewell to Bob Bakish, Nike parted ways with John Donahoe and Peloton saw Barry McCarthy step down.
The retail and consumer sectors weren’t immune to this trend. Kohl’s CEO Tom Kingsbury announced his departure following extended periods of sales difficulties, while WW International’s Sima Sistani resigned in the wake of significant stock value erosion.