'THE DAILY CORPORATE GOVERNANCE REPORT’ (for public company boards, the C-suite and GCs)

? ? ? ? ?Please see the items below with the related links (NOTE: access to link content may be metered, require a no-charge registration or require a paid digital subscription)?

? ? ? ? ? ? ? (i) the ideal CEO tenure is?/from forklift driver to CEO at Costco: is appointing a 'company lifer' as CEO a risky choice?:?

? ? ? ? ? ? ? ? ? (a) This recent NY Times article on May 2, "The C.E.O.s Who Just Won’t Quit", inter alia referred to a recent Spencer Stuart?study that found that "companies had some of their highest performing years once their chief executives had put in 11 to 15 years of their own", and also cited the view of Harvard Business School executive fellow and former Medtronic?CEO Bill George that "the sweet spot (for a CEO) is around a decade"?(see item (ii) from May 15/24). More discussion on the ideal tenure of a CEO in last Thursday's Fortune CEO Daily Newsletter, "When is the time right for a CEO to step aside?" and the companion Fortune article, "CEOs can hurt their companies if they stay too long. When’s the right time to say goodbye?" Below is from the Newsletter:

? ? ? ? ? ? ? ? ? ? ? ?"......A....common and,,,,difficult succession call is: a CEO who has performed well or at least acceptably for several years, and neither the board of directors nor the CEO is sure what to do next. That’s a big problem, because a board’s No. 1 job, more important than all its other jobs combined, is making sure the company has the right CEO at the right time. In theory, that’s an exercise in data and hard logic. In practice, it’s never so clear. “You have all the dynamics around who actually owns the decision as to whether to push somebody out or demand something different,” Spencer Stuart succession expert Robert Stark tells me for an article I’ve written,?published today, on finding a CEO’s sell-by date. “There’s this gap between the objective performance and whether people stay in the role.".......

? ? ? ? ? ? ? ? ? ? ? "The toughest succession calls involve CEOs who make it to their second decade as boss. “When they get past 10 years, they know how to manipulate the stock price and keep it going,” says former Medtronic CEO Bill George,?who declared at the beginning of his tenure that he wouldn’t stay more than ten years.?“They fail to make the bold moves. They just want to hang in there.” Pushing that CEO out is awfully difficult for a board of directors, yet it may often be the right move.

? ? ? ? ? ? ? ? ? ? ? ? "The big message from the experts: Succession is way more psychological than mathematical.....More often the main factors are a leader’s evolving self-image and anxiety over post-CEO life, plus directors’ relationships with the boss, which often include an element of gratitude. Every CEO, board, and company is unique, which means succession will always be a deeply human exercise—at least until AI takes over."

? ? ? ? ? ? ? ? ? ? ? Below is from the Fortune article:

? ? ? ? ? ? ? ? ? ? ? ".....The S&P?500 average is 9.2 years, and despite occasional articles exclaiming that CEO tenures are shortening, they aren’t;?over the past 20 years they’ve held fairly stable. Robert Stark, a succession expert at Spencer Stuart, believes it’s possible that?“the average in and of itself becomes a self-fulfilling prophecy. In the absence of any good insight about how long CEOs should serve, they think, ‘Oh, I should be about average.’?”?

? ? ? ? ? ? ? ? ? ? ? "But those who study CEOs for a living appear to have homed in on more precise answers—and discovered that the expiration date often arrives just when CEOs have reached that stage where they seem strongest. A 2021 study by researchers from Boston University, the University of Cologne, the University of St. Gallen, and the Karlsruhe Institute of Technology examined S&P?1500 companies over 25 years and found that on average, a company’s value peaks and plateaus around the CEO’s 10th year in the job. After 14 years or so the firm’s value starts to fall, at first by a little, then by a lot, and it keeps declining for as long as the CEO holds on.......

? ? ? ? ? ? ? ? ? ? ? "(F)or corporate boards, the average is of limited help. Considering that CEOs with tenures of wildly more and less than 10 years have performed spectacularly, dumping a leader just because he or she has hit the decade mark may not be a slam dunk. As boards face unprecedented pressure to get succession right, a new leadership framework has emerged around when to say when. The matrix is laid out in?The Life Cycle of a CEO: The Myths and Truths of How Leaders Succeed,?written by Spencer Stuart’s Claudius Hildebrand and Stark?and based on an influential earlier article they wrote with Jim Citrin, who leads the firm’s CEO practice. Their model comprises five stages......"

? ? ? ? ? ? ? ? ? ? (b) On Oct.18/23, Costco Wholesale Corporation?announced this press release?the promotion of Ron Vachris, its President and COO since February 2022, to the position of President and CEO,?effective?January 1, 2024 (see item (iv)(a) from Oct. 19/24). As noted in last Tuesday's Fortune CEO Daily Newsletter, "Costco’s new ‘lifer’ CEO started as a forklift driver for the big box store", the new CEO began at Costco some 41 years ago as a teenaged forklift driver, and was appointed CEO despite "conventional wisdom in the business world holds that a company lifer can be a risky choice as a new CEO":

? ? ? ? ? ? ? ? ? ? ? "Conventional wisdom in the business world holds that a company lifer can be a risky choice as a new CEO. Such a person is often too entrenched, the stereotype goes, to bring in fresh ideas.?That can be especially true in retail, with its constant upheaval. Ron Vachris of Costco Wholesale?offers a counterpoint:?The 41-year veteran of the bulk retailer took its reins in January, decades after starting as a teenaged forklift driver?at Price Club (which went on to become part of the Costco empire).

? ? ? ? ? ? ? ? ? ? ? ?"We are just five months into his tenure so it’s too early to assess his performance. But Vachris, only Costco’s third CEO, was a key architect of the retailer’s relentless success in recent years—as operations chief, merchandising chief, and head of real estate....Vachris’s leadership style is informed by the approach of Costco’s iconic founder and CEO for 28 years, Jim Sinegal: Listen to underlings and trust their expertise. “You’ve got to give people room to try new things,” Vachris told me in an interview?at Costco’s headquarters in Issaquah, Wash., for my deep dive into the cult of Costco, published today.....

? ? ? ? ? ? ? ? ? ? ? ?"When you have a dynamic culture where people aren’t afraid to speak up, the institutional knowledge and loyalty of “lifers”—whether in the C-suite or on the front line—can be a precious asset.?Costco’s perennially strong results prove that."

? ? ? ? ? ? ? ? ? ? ? ? For the full "deep dive" into the cult of Costco,?see this related Fortune article last Tuesday, "The cult of Costco: How one of America’s biggest retailers methodically turns casual shoppers into fanatics."

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? ? ? ? ? ? ? (ii) (more on)transitioning from CEO to chair: will Jamie Dimon follow the example of Morgan Stanley's James Gorman?/Jamie Dimon speaks on the issue:?

? ? ? ? ? ? ? ? ? (a) On Oct. 25/23, Morgan Stanley announced in this press release?that Co-President Ted Pick would become CEO effective January 1, 2024, with the?James Gorman, then CEO, to transition to executive chairman. As widely reported in the business press, at Morgan Stanley's AGM on May 23, James Gorman said "that given Pick's successful transition as CEO, Gorman will step down on Dec. 31", consistent with what he had told WSJ in an interview?earlier this year:

? ? ? ? ? ? ? ? ? ? ? "Gorman plans to stay on for no more than a year and to keep out of Pick’s hair in the process.?He’s there to support him, not to direct him, he says. A rule Gorman has set for himself: He won’t be going into Pick’s office. The new CEO can turn to him when he needs guidance. So far, Gorman has introduced him to government officials and helped with board agendas."

? ? ? ? ? ? ? ? ? ? ? ? ? Below is from this Bloomberg article last Tuesday on transitioning from CEO to chair, "What JPMorgan Can Learn From Morgan Stanley....."

? ? ? ? ? ? ? ? ? ? ? ? ? ".......There’s a lesson.....for long-term leaders: When the time comes, let go. James Gorman at Morgan Stanley has definitely learned it; Jamie Dimon and the board of JPMorgan Chase & Co. should reflect on it over the next couple of years. Gorman will quit his executive chairman role at the end of this year, he said last week, having handed the chief executive officer job to Ted Pick in January.?

? ? ? ? ? ? ? ? ? ? ? ?"Moving on is the right thing to do to ensure that everyone at the bank knows who’s in charge. Gorman said as much when Pick’s promotion was announced:?"Frankly, I shouldn't stay too long because it's Ted's job to run the firm now,” he told my colleague Sonali Basak Bloomberg Television. Also last week, Dimon clearly signaled for the first time that the clock is ticking on his time at the top of the bank he’s led for two decades.....although he raised the possibility of staying on as chairman for a while alongside the new leader.?

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? ? ? ? ? ? ? ? ? ? ? "Moving from CEO to chairman can help with a transition, but it tends to work when the handover is quick and clear — and the outgoing leader doesn’t hang around too long. No new boss wants to feel second-guessed by a former CEO, or by employees watching a former CEO for signs of approval or disapproval. A successor can be undermined easily if other executives can go around them to appeal decisions to the former boss, too. This isn’t just intuitive; executive search firm Spencer Stuart published research in December....."Our research found that companies tend to have superior performance when executive chairs have shorter tenures (less than a year),” the authors wrote.......

? ? ? ? ? ? ? ? ? ? ?"Getting a handover right after a long spell under a singular leader is always tough.?The outgoing chief should be consulted; they likely know what the business needs as well as anyone. But succession is the board’s job and its responsibility – not only in the moment of choosing, but also in supporting the new CEO thereafter.....Dimon has often said it is up to JPMorgan’s board how long he stays and who replaces him.....(W)hen the time comes, if he does remain as chairman, they should beg him to look to Gorman.....and not hang around too long."

? ? ? ? ? ? ? ? ? ? ? ?(For more discussion on the role of executive chair,?see item (i) from March 21/24.)

? ? ? ? ? ? ? ? ?(b) And here are?the very practical thoughts of Jamie Dimon himself on the issue,?as reported in this Fortune article last Thursday, "Jamie Dimon is so over spectators questioning whether his possible move from CEO to chairman would be bad for JPMorgan: ‘How the hell do they know? There’s no magic to it’":

? ? ? ? ? ? ? ? ? ? ? ".....While Dimon will take a step back as CEO,?a move into the chairman role has been teased. However, Fortune 500 businesses will be well aware of the issues that can arise between a CEO and chairman, particularly when an influential character like Dimon is involved. But the billionaire fired back at such speculation, saying: “I love it when these people make binary statements of: ‘It’s good, it’s bad.’ How the hell do they know? That’s why you have a board. The board should decide what’s in the best interest of the company.”?

? ? ? ? ? ? ? ? ? ? ? "There are plenty of examples of businesses which have had separate CEOs and chairmen that didn’t work out, he added, but countered the focus should be on:?“Does the company function properly? Does it have good governance? “One of the most importance governance things—and I’ve been doing this since Bank One—every single meeting we have [with the board] they met all the senior people, they know them all well, but at all the meetings I leave at one point and they do stuff without me. It’s run by the lead director which basically has the same authority as a chairman …I mean like who cares??We were overstating the importance of this issue at one point.”?

? ? ? ? ? ? ? ? ? ? ? "And despite the instances where a CEO and chairman haven’t seen eye to eye, there are also examples where this partnership has really worked.?“There’s some examples … where it was a great partnership and they went on for years,” Dimon, a Harvard alumni, said. 'There’s no magic to it but the board should do the right thing—if the chairman is getting in the way of the new CEO they should go. If the chairman is helping the?new CEO in a million different ways, they should stay'....."

? ? ? ? ? ? ? (iii) disclosing a data breach/SEC filing of the day: NYSE-listed, live entertainment company Live Nation Entertainment, Inc. disclosed last Friday in this Current Report filed with the SEC that?it had experienced a data breach, as follows:

? ? ? ? ? ? ? ? ? ? "On May 20, 2024, Live Nation Entertainment, Inc. identified unauthorized activity within a third-party cloud database environment containing Company data (primarily from its Ticketmaster L.L.C. subsidiary) and launched an investigation with industry-leading forensic investigators to understand what happened. On May 27, 2024, a criminal threat actor offered what it alleged to be Company user data for sale via the dark web. We are working to mitigate risk to our users and the Company, and have notified and are cooperating with law enforcement.?As appropriate, we are also notifying regulatory authorities and users with respect to unauthorized access to personal information. As of the date of this filing, the incident has not had, and we do not believe it is reasonably likely to have, a material impact on our overall business operations or on our financial condition or results of operations. We continue to evaluate the risks and our remediation efforts are ongoing."

? ? ? ? ? ? ? (iv) press release of the day: Nasdaq-listed Krispy Kreme, Inc.?announced last Thursday in?this press release?the appointment of a Chief Legal Officer reporting to the CEO, as follows:

? ? ? ? ? ? ? ? ? ? ?"Krispy Kreme, Inc. today announced that Atiba Adams will join the company as Chief Legal Officer effective June 25, 2024. Adams will report to Josh Charlesworth, President and Chief Executive Officer of Krispy Kreme. Adams brings more than 20 years of legal experience guiding multibillion-dollar publicly traded and privately held companies such as Mars, Pfizer, and most recently, Bausch + Lomb, where he served as Senior Vice President and Deputy General Counsel......"

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