Last week Disney announced that its 66 year old CEO, Bob Iger, will stay in his position through at least July 2019.
Why is this such a big deal? Because Disney is struggling to find Mr. Iger’s successor. Mr. Iger’s heir apparent, Thomas Staggs, left Disney last May.
Frankly, I think this is a joke. I understand Mr. Iger has had plenty of success in his 12 years as Disney’s CEO. But you mean to tell me that a company with the resources of Disney can’t find and develop a capable leader in 12 years?
Disney can offer almost any incentive under the sun
Bob Iger made $43.9 million in 2016. $43.9 million. Let that number sink in. It’s important.
What Disney is saying is that of the 7+ billion people on the planet, the company so far has not been able to find one person (a) whose competence is on par with Bog Iger’s, and (b) who would accept the job for a cool $40+ million annual compensation package. That’s beyond wild.
What’s really going on? I think the CEOs themselves, and the boards that ostensibly hire them, have an exaggerated estimation of a CEO’s irreplacability.
Yes, you need a very smart person. Yes, you need someone with next level leadership skills. Yes, you need someone who is familiar with both the company and its markets.
But you have $40 million to offer annually. You have near universal brand awareness. You have prestige and global reach. Disney checks every single box, in terms of being an attractive landing spot for a senior executive.
It’s not a matter of being picky. Disney’s board is actually hurting the company
It’s one thing if boards were just being goofy, say by overestimating the impact of any particular CEO. It’s worse than that, though. Boards are actively imperiling their companies with their risk aversion.
Why hasn’t Disney replaced Bob Iger yet? Or even hinted at a potential successor? Because they’re scared. They’re scared that they’ll pick the wrong person. They’re scared that whoever they choose won’t lead them through the same stock price growth that Mr. Iger has.
And what’s the result? A message is communicated, and reinforced, that Disney effectively is Bob Iger. Even if you have $40 million to throw at someone, and every perk you can imagine, you can’t find a suitable leader, because there’s only one Bob Iger on the planet.
How absurd. The Walt Disney Company was founded in 1923. The company came well before Bob Iger, and it’ll be around long after Bob Iger is gone. No, not every CEO has been equally capable. You can’t ever guarantee you’re going to make a good personnel decision, no matter the resources available. But the company has survived executive transition after executive transition.
What’s the riskier move? Naming a new CEO who might underperform. Or not having the courage to name a new CEO at all
That’s the indictment, for me, of the Disney board. They see the greatest risk as naming an underperforming CEO. The real risk, particularly with a 66 year old CEO and a $180 billion market capitalization, is having no succession plan at all.
You have endless access to the finest executive talent the world has to offer. In 12 years you couldn’t have found a stable of capable folks, and built an elaborate development program around them?
Yes, I know we get deep into politics here. Maybe Bob Iger didn’t respond well to the obvious grooming of his successor. Maybe potential successors were poached. But you’re Disney. You can offer your folks endless opportunity internally. You have multitudes of divisions, all with global reach. You have plenty of ways to keep talented folks stimulated. You have endless ways to demonstrate appreciation for their work.
Alas, we’re at this point, where Disney extends the contract of a CEO who was originally meant to have passed the torch by now. Personally, I think it’s a stunning failure of leadership development. It’s the classic case of suppressing short-term risk, while simultaneously accumulating long-term risk. Hopefully Disney can avoid getting burned.
P.S. Disney isn’t the only company to struggle with this issue
I heard about the Bog Iger extension last week. I wasn’t immediately inclined to write about it. But then this week, I listened to a brief interview Jamie Dimon, the CEO of JPMorgan Chase, gave to Bloomberg.
Q: Do you have any plans about how long you might stay in this position?
A: I love what I do, and I still have the energy to do it…As long as the board is happy with me. I always say five years. I’ll be 65. And I do think there is a time, when the right person is ready, that I should leave.
Wild. Totally freaking wild.
Jamie Dimon has been CEO of JPMorgan Chase since December 31, 2005. The bank has had over 11 years to prepare someone to take Mr. Dimon’s seat.
I can’t know exactly what Jamie Dimon meant with his answer about five years, or when someone is ready. I take it to mean that someone is not ready right now. Eleven years is a long run for a Fortune 500 CEO. The average CEO tenure is around 7 to 8 years. The median tenure is 6 to 7 years.
Mr. Dimon and Mr. Iger are well outside those ranges. And yet there’s considerable circumstantial evidence that neither company has identified and fully prepared a successor.
It’s a classic demonstration of the bias of short-term thinking. Disney and JPMorgan Chase are both doing well. They’re very happy with their respective CEOs. That works wonderfully…right up until it doesn’t. That’s when the real cost of insufficient succession planning will rear its ugly head.