Why is the highest number of CEOs fired in recent times?

Srikant Gokhale
Mar 23
15 min read

Updated: Mar 29

A survey of 3,000 business executives this fall by AlixPartners found that 72% of CEOs worried about losing their jobs due to disruption. That's up from the 52% who said the same in the previous year.

Increased pressures have pushed a record number of CEOs to join The Great Resignation. Altogether, 668 CEOs left their roles at U.S. companies so far in 2022, according to a recent report from Challenger, Gray & Christmas, Inc. This number marks the highest total of CEO departures in this time period since 2002. It is also 24% higher than the 539 CEO departures at the same time last year. The retail industry also has seen a similar trend; as the industry navigates evolving consumer behaviors, inflation, and looming recession, some 62 CEOs across the retail sector have left so far. Why such an exodus of CEOs in record number?

As the retail sector stares down an increasingly challenging landscape, experts say executive shakeups will likely become more common. Stimulus spending boosted sales during the pandemic will no longer mask any underlying business struggles.

Retail CEOs are going to have to earn their seats and earn their money because their jobs just got a lot harder in the last six months."- John San Marco, Neuberger Berman

As tension builds for retail CEOs to drive growth, there's a greater probability they'll disappoint boards and shareholders and be shown the door. In other cases, executives might see the writing on the wall and want to leave while still riding high. Don't expect the stream of departures from retailers' C-suites to stop anytime soon. The retail sector is going through some seismic shifts.

- Prominent CEOs' departure in retail during recent times

Starbucks CEO, Laxman Narsimhan was fired in August 2024 due to decline is sales for two quarters.
Dollar General CEO Todd Vasos stepped down. Like other retailers, Tennessee-based Dollar General faces growing margin pressures from higher supply chain costs and weaker demand for high-margin discretionary goods.
GAP has fired CEO Sonia Syngal, as she failed to arrest the casual clothing decline. Gap shares have halved in value over the last year with rising costs and lowered demand, battered by declining sales and supply chain struggles. These problems were only exacerbated at Old Navy, the company's top revenue generator. The failed expansion of the brand's plus-size offerings led to excessive inventories in extra small and extra large sizes and the departure of Old Navy CEO Nancy.
In June 2022, Amazon.com CEO Dave Clark stepped down. Clark was in charge of the e-commerce business: the company's primary revenue source but has often struggled to be profitable.

"The past few years have been among the most challenging and unpredictable in the history of Amazon's Consumer business- Andy Jassy, CEO-Amazon.

Steve Rowe stepped down as chief executive of Marks & Spencer after a turbulent six years in the top job. But he departs with M&S's share price at well below half the level it was when he became CEO in 2016, with U.K. consumers facing the biggest squeeze on disposable income since at least the 1950s.
Ocado Retail chief executive Melanie Smith left the online grocer after three years at the helm.
After struggling to become profitable, luxury resale retailer The RealReal announced in early June that founder Julie Wainwright was stepping down as CEO.
Ancora, a hedge fund with a 2.5% stake in Kohl's, asked for the replacement of CEO Michelle Gass and board chairman Peter Boneparth, with business leaders with operating expertise and experience in turning companies around. Kohl's announced that Chief Marketing Officer Greg Revelle and Chief Merchandising Officer Doug Howe would leave the company.

Kohl's needs new Leadership with demonstrated experience in cost containment, margin expansion, product catalog optimization, and, most importantly, turnarounds- Ancora Hedge fund in a letter

GameStop fired its chief financial officer in the middle of the video game retailer's efforts to revamp its business.

Bed Bath and Beyond fired CEO Mark Tritton after the company reported a net loss of $385 million, compared to a loss of $51 million, and sales decreased by 25% compared to the last year.

"We went from what was a rolling sea of worry about economic cycles to a choppy sea of all these disruptive forces." "They realized that their business models, which have served them well for several years, are largely now not fit for the purpose."

Frisk, CEO of Under Armour, announced his departure in May after a failed turnaround plan. The company reported disappointing quarterly earnings due to ongoing supply chain challenges and a hit to the company's business in China.
In some cases, longtime retail leaders voluntarily decide to leave after helping companies navigate the pandemic among those who've stepped down after long tenures are Home Depot's former CEO Craig Menear and Walmart's former CFO Brett Biggs.

- It is becoming hard to manage

"Basically, it's easy to be the captain when the seas are calm." - Managing director of GlobalData Neil Saunders

Recent studies show that many top executives are joining the Great Resignation in large numbers. They are tired of the unrelenting stress, pressure, and accompanying burnout. "The last couple of years for CEOs have been exhausting. Now, as the operating environment worsens, CEOs are deciding if they want — or are able — to take on the challenges that await them. And investors are determining if they can be confident in their current leaders. Patience wears thin for poor performance. When retailer posts consecutive quarters of sluggish sales, fails to post a profit, or falls behind its competitors, turnover in the C-suite becomes more likely. "It's become tough to hide in this environment if you don't have the right strategy adopted." As the sales surge from the pandemic fades, old leaders are being pushed out, and new ones are being brought in to slash expenses and shrink brick-and-mortar footprints. "Some of the CEO changes have taken place at companies that probably will end up being much smaller than they are today. Retailers are also increasingly tapping outsiders to lead their companies in new directions

"If you have a team and for three or four years you're not winning, what do you do? You change up the coach."- Craig Rowley, Korn Ferry

Not all retail executives could navigate the ebb and flow of online shopping during the pandemic and the subsequent shift back to the physical world as the economy reopened. That said, it has been particularly difficult for the sector throughout the pandemic as they've been hit with store closures, supply chain disruptions, and — lately — excess inventory as consumer behavior shifts to outside-the-home activities. As the risk of an economic slowdown looms, more boards are looking for leaders with a strong track record for operational execution and financial discipline and CEOs who can blend the art and science of retail in the next phase of growth.

"It's more difficult to operate as an omnichannel retailer than either a pure-play physical retailer or a pure-play e-commerce retailer," Forte says.

With 80% of CEOs' compensation linked to share price increases, the stakes are higher for the top brass, as the buoyant economy and record-setting stock market made the CEOs look like geniuses. However, it seems the good times are over. Instead of enjoying fat gains on their stock options, the stock market plummeted to bear market territory, erasing their gains.

CEOs now must contend with stubborn inflation, supply chain disruptions, the impact of a possible world war on their businesses, a likely recession, and possible stagflation. These trends would call for CEOs to cut costs, downsize staff, enacting hiring freezes, rescind job offers and consider cutting salaries. These actions would weigh heavily on the top executives and make their lives considerably more difficult. Many CEOs are leaving as managing the business is getting more challenging, with lower prospects of CEOs' income increase in terms of stock options and awards.

Why such an exodus of Retail CEOs?

Based on interviews with 73 CEOs who had been fired, researchers for the CEO Genome Project found that the leading reasons for dismissal were poor business performance (30%); relationship issues with the Board (26%); a lack of crucial skill sets (22%) and alienating the management team (12%). It is a matter of grave concern that CEOs do not have the required skill sets and are unaware of what is needed to succeed at the very top in managing a retail business. They are using obsolete toolkits/playbooks of the past to drive the future.

"It doesn't look like you use yesterday's retail playbook to solve today's problems." – Corrie Barry, CEO- Best Buy

Here are some reasons, why such a departure of CEOs in large numbers is imminent even in the future:

Reason#1: CEOs are in Denial

Not able to comprehend the real issues/problems are facing them. Docile and reactive Leadership.
Business Model is broken: Retailers have not evolved as everything has changed; customers, competition, and business environment. Therefore do not offer anything Unique to customers. It results in more of the same on perpetual sale or promotions resulting in erosion of brand equity.
Stop listening: To people, frontline staff, customers, and market trends.
Forgotten the basics: Focus on the customer, improve productivity, Faster decision making, and speed to market

CEOs are out of touch with the reality of customers, competition, and changing retail landscape.

Reason#2: CEOs are Value Destroyers

As per conventional wisdom, job No.1 of CEOs is to create business value (Shareholder value). Most retail CEOs who are fired have significantly destroyed the shareholder value under their watch.

CEOs have no clue how to create Business value beyond P&L. 80% of long-term shareholder value is created by Intangibles, not Profits.
CEOS are not focusing on intangibles; Purpose and Vision, Business model, customer experience, Unique services, Product differentiation, Business process improvements, Brand building, innovating, and experimenting with new ideas.

Due to pressure from the stock market, CEOs are focusing on short-term focus on improving operational effectiveness and P&L management rather than improving long-term shareholder value by focusing on intangibles; CEOs are destroying shareholder values.

Reason#3: CEOs lack strategic focus

Understanding of market dynamics, future trends, and how to harness them proactively to take advantage by evolving business model to the new reality, to remain relevant and ahead of the curve
Changing customer behavior, wants, and needs

Understanding of new and agile Competition
Building a solid presence in Online Business through Omni Channel by investing in digital transformation leveraging on store presence
New capabilities/Skill sets building
Innovation, experimenting, and risk-taking
Developing people and creating collaborating team busting silos and layers

CEOs are completely lacking strategic focus resulting in More of the same and incremental approach and too many actions not having the desired impact. CEOs are directionless, resulting in an uncertain future.

Problem#4: Not knowing the art of Managing Business

The ability to blend the art and science of retail is exactly what is needed in the next phase of growth for The Home Depot. – Craig Manear, CEO- Home Depot

In the past, retail executives typically reached the top job through two paths: They were either great merchants with a canny ability to anticipate popular styles and new trends, or skilled operators, with a mastery of the systems necessary to keep stores running smoothly. The shift to online shopping further complicated the job, requiring an understanding of technology and data. CEOs are failing to reinvent and evolve themselves in a changing landscape to remain relevant.

Seeing the Elephant in the room- Conceptual skills to bring it all together: The no. 1 requirement to be a business leader is missing in most CEOs as they operate more in silos. Most CEOs understand the science part of managing a business, like finance, Category management, marketing (4Ps), Retail operation, and supply chain. But fail to comprehend the more critical art part of managing like conceptual skills, strategy, purpose, Vision, culture, collaborative teamwork, motivating and galvanizing people into action, and much-needed communication skills. The business schools must take the blame as they are training future managers on the science part but not enough on the art part. The MBA curriculum has to change if future managers have to be successful in an increasingly uncertain, volatile, and ever-evolving retail landscape.

Encouraging Out of Box thinking: Pushing beyond the ordinary
Foster Collaborative teamwork
Challenge status quo: only paranoid survive, Creating a sense of urgency
Creativity, visualization, and design thinking
Learn new skills and adapt to the marketplace in a proactive way
Manage Unknown and risk-taking
Communicating Vision, purpose, and motivating the team in a compelling way

The landscape of retailing has changed in the post the Covid era. The skills necessary for a CEO to succeed today are much broader."- Craig Johnson, the president of consulting firm Customer Growth Partners.

Reason#5: CEOs' wrong incentives make them value extractors

The design of the incentive structure is critical. When CEOs are rewarded disproportionately for short-term performance, it reinforces the kind of behavior that destroys shareholder value in the long term. Instead of investing the profits in improving the performance, capability building innovation, experimentation, people, brand building, digital transformation, and R&D, CEOs are enriching themselves by indulging in measures like higher dividend payout and share buyback to increase share prices in the short term.

More than 85% of CEOs' compensation is based on annual bonuses (based on profits), Stock awards, and Stock options based on share price movement. CEOs use share buybacks to prop up demand for their stock and increase earnings per share by reducing the number of shares in circulation, thereby increasing the share price in the short run.

"Too many companies have cut capital expenditure and even increased debt to boost dividends and increase share buybacks."

As a result, the very people we rely on to invest in the productive capabilities that will increase shared prosperity are instead devoting most of their companies' profits to uses that will increase their own prosperity.. With low-interest rates boosting the profits and values, S&P 500 companies bought back $ 882 Billion of their own stock in 2021, up from $ 520 Billion in 2020.

Trillions of dollars that could have been spent on innovation and job creation in the U.S. economy over the past three decades have instead been used to buy back shares for what is effectively stock-price manipulation. The total cash out as % of net income is going up over the years, constituting 80% of Net income. This means very little cash is left for productive purposes. At times, CEOs have borrowed to finance the cash payout to boost the shareholder value and enrich them.

Reason#6: CEOs with MBA degrees are more likely to fail

Business schools like to boast about how many of their graduates have become CEOs—Harvard, especially since it has the most. But how do these people do as CEOs: are the skills needed to perform there the same as those that get them there? MBA as CEOs, there are troubling shreds of evidence- Henry Mintzberg, Professor of management studies at Mcgill University

Danny Miller, Director of the Research Center for Business Families at the HEC business school in Montreal, the other. They authored two articles with much larger samples and even more troubling results.

Danny Miller at HEC Business school and Xiaowei Xu of the University of Rhode Island in a research article "A Fleeting Glory: Self-serving Behavior among Celebrated MBA CEOs" 4, they used an ingenious sample: 444 chief executives of American corporations celebrated on the covers of Business Week, Fortune, and Forbes magazines from 1970 to 2008. The research compared the subsequent performance of those companies that were headed by MBAs—one-quarter of the total—with the ones that were not. Both sets of companies declined in performance after those cover stories—but the ones headed by MBAs fell more quickly.

Their second study, entitled "MBA CEOs, Short-term Management and Performance" (20176), used a more comprehensive, more recent sample of 5004 CEOs of major U.S. public corporations from 2003 to 2013. The results were much the same. "…we find that MBA CEOs are more apt than their non-MBA counterparts to engage in short-term strategic expedients such as positive earnings management and suppression of R&D, which in turn are followed by compromised firm market valuations."

"Does the Business school promote self-serving behavior? Many MBA programs emphasize bottom-line performance, financial and accounting measures and levers, stock prices, competition, and personal economic success. They place less emphasis on creative and scientific skills, intrinsic job satisfaction, social contribution, and the ethical treatment of stakeholders."

MBA programs do well in training for the business functions, such as finance and marketing, if not for management. So why do they persist in promoting this education for management, which, according to mounting evidence, produces so much mismanagement? – Henry Mitzberg

Reason#7: Long tenure of CEO hurts performance

It's a familiar cycle: A CEO takes office, begins gaining knowledge and experience, and is soon launching initiatives that boost the bottom line. Fast-forward a decade, the same executive is risk-averse and slow to adapt to change—and the company's performance is declining. According to research published in the article "Long CEO Tenure Can Hurt Performance by Xueming Luo, Vamsi K. Kanuri, and Michelle Andrews in Harvard Business Review, the average CEO holds office for 7.6 years, but the optimal tenure length is 4.8 years in the USA.

Using a seasonal metaphor, the authors of that study argue that CEOs are most effective in their early seasons because they are most open to outside and inside inputs and to taking risks. They spend time with customers, and they listen. They expand their knowledge and skills repertoires during this time and generate new ideas and initiatives, thus improving firm performance.

In their later seasons, however, CEOs commit to current, sometimes obsolete paradigms, rely more on internal information sources, and become risk averse, tending to adapt less to the external environment and hurting firm performance. They become less attuned to the market. Also, over time they become more attached to the status quo. In other words, their worldview calcifies, they surround themselves with people who generally share their views, and they become less adept at adapting to market and competitive changes. Furthermore, suppose boards and CEOs get too cozy over the years. In that case, directors are less likely to ask the hard questions of whether the leader is being too cautious or too internally focused to make the right decisions.

Another point of view on CEO tenure is reflected in a study by SpencerStuart, raises the very pertinent question: " How does a board know when it's time for a high-achieving leader to step down?

"If you're successful for ten years or so, it's very hard for board members to look you in the eye and say, 'You ought to go. "So you could stick around a long time and yet not be doing your job as well as somebody else could."- The CEO Life cycle, SpencerStuart

Conclusion: How to avoid CEOs' departure at a rapid rate

Besides tackling the reasons explained, there are immediate implications for the Board, CEOs, and Business schools, to arrest such an exodus of CEOs before it becomes too late.

- Start with Different horses for different courses: The right fit CEO

Firms at different points in a business lifecycle require different qualities in a leader. "Through those growth stages, just like anything, you need different skills and talents to be effective and have performance at that job - O'Reilly, CEO and founder of Orbital Shift

Not many companies admit this, but different CEO's will be needed for different stages of company growth.

There are Early stage CEOs who are hands-on, inward-facing and align their team for a common Vision and work with shoestring budgets,
Then there are Growth stage CEOs who develop strategic Vision and focus on external forces, including hiring talent, investors, and customers.
Apart from them, there are turnaround artists with a detailed understanding of the business situation, out-of-box thinking, leading in unchartered water, and the ability to fire people and downsize organizations and manage complexity,
finally, some CEOs do an excellent job in maintaining the status quo (Maintenance stage) in the organization with a stable business by focusing on efficiency, teamwork, collaboration, and incremental improvements.

Imagine a turnaround specialist is hired for the Early stage or Maintenance stage; it would be a recipe for disaster that precisely happen in many organization with the mismatch in the hiring of CEO, leading to declining of the organization.

Ultimately the business needs the right people to execute its next growth stage, and sometimes that can also mean a CEO change. Sometimes a short tenure might occur when a CEO realizes they aren't best for the next phase of the business. For example, a CEO might come on to do a significant company transformation, only to realize that once that period is over, their skills are less relevant for running an established operation. Therefore, it might be time for that chief executive to move on.

According to a study, the Board should assess the tenure of the CEO based on stages of lifecycle by asking the thorny question of 'Are you still the right one for the task ahead?'" If not, then replace them. "8

- Implications for the Board

The Board, whose no.1 job is to choose the CEO, must perform their role effectively by getting the right CEO for the right business lifecycle.
They must shorten the tenure of the CEO to 4 years. Another four years extension based on performance and next stage of the lifecycle, on clearly defined purpose, strategy, and deliverables in terms of long-term focus.
The correction of CEOs incentive structure, that promotes the long-term value creation and investment in people, capabilities, and innovations.

- Implications for the Business Schools

Business enterprises are the organ of society. They do not exist for their own sake but to fulfill a specific social purpose and to satisfy a specific need of a society, a community, or an individual- Peter Drucker, Management Guru

Business schools have a crucial responsibility in developing future leaders/managers in the right way by inculcating ' what is the real purpose of the firm.' The firm purpose is not just to maximize shareholder value but also to deliver value to its customers, invest in employees, deal fairly with suppliers and support the communities in which they operate. They must change the curriculum to teach the art of managing business and developing much-needed conceptual and integration skills to see the Elephant in the room (real issues). Purpose, not profits, is going to make a firm resilient.

CEOs have to constantly learn new skill-sets and adapt to changing realities to be successful in the ever-evolving retail landscape. Finally, the big question is, "What are the right skill sets and qualities required for a successful CEO in the retail organization." This requires much more profound research. Based on these preliminary insights, we are embarking on a 3-year ambitious project based on the study of the 50 most successful Retail CEOs/ Founders along with 20 Retail CEOs who destroyed the organization spanning over 100 years to unearth "what makes a successful retail CEO."

"A ship is safe in harbor, but that's not what ships are for" - WILLIAM SHEDD, NINETEENTH-CENTURY AMERICAN THEOLOGIAN" Excerpt From: Phil Cooke. "One Big Thing."

References:

From Gap to GameStop, there's a retail executive exodus underway — and more departures are coming, Melissa Repko, Lauren Thomas, cnbc.com, 20th July 2022
Ceos-are-quitting-and-joining-the-great-resignation-heres-why,Jack Kelly, June 2022, Forbes.com,
Miller, interviewed in the Harvard Business Review (Nicole Torres, "MBAs are more self-serving than other CEOs", December 2016)
MBAs as CEOs: Some troubling evidence, Henry Mintzberg,February 2017
U.S. companies buy back shares in record volumes, ft.com, Nicolas Megaw, March 2022
Profits without prosperity, William Lazonic,hbr.org, September 2014
Long CEO Tenure Can Hurt Performance, Xueming Luo, Vamsi K. Kanuri, and Michelle Andrews, HBR.org, March 2013
The CEO Life Cycle: A study of performance over time, James M. Citrin, Claudius A. Hildebrand, and Robert J. Stark, HBR.org, November 2019
From Gap to Dollar General, retail chiefs quit as challenges grow, Business-standrad.com,July 2022
MBAs as CEOs: Some troubling evidence, Henry Mintzberg,February 2017