A CEO Succession Case Study: Thoughtfulness
The Art of the Honorable Exit: Why Thoughtfulness is the Ultimate Retention Strategy
One of my early CEO succession clients over a decade ago was an exemplary example of how to treat CEO contenders in an internal competition. There were three internal candidates for the top role, but the head of Sales ended up getting the seat as part of a growth strategy in a Private Equity plan. The company ended up selling for one of the largest industry multiples in its history.
In this scenario, the CEO was wise enough to know that the contenders who didn’t get the top job may have felt slighted. The last thing he wanted—or needed—was for them to leave during the critical PE run-up. Instead of treating this team dynamic as an afterthought, he tackled it head-on.
He met with each of these leaders and said: “Thank you for applying for the CEO role and being willing to do more for this company. Even though you didn’t get this role, I want to acknowledge your desire for more, and see how we might be able to expand your contribution.” The two leaders who had put their hats in the ring felt deeply valued. To this day, they comment on how well the CEO handled that moment. I was fortunate to be able to coach them during their subsequent role expansion.
In extreme examples where the stakes are global, we see companies mirroring this sentiment with staggering financial commitments. Disney recently awarded runner-up Dana Walden a $5.26 million stock grant and a target compensation of $27 million to ensure she stayed put after Josh D’Amaro was named successor. Similarly, Morgan Stanley paid its dual runners-up $20 million each to maintain stability.
While few companies have Disney’s budget, every leader has the capacity to show care. The "big bucks" reflect the massive cost of turnover—typically many multiples of an executive’s salary—but the money is only a temporary bridge. Recent data from consultancy FW Cook suggests these grants usually only retain talent for two to three years.
To build a legacy that lasts longer than a vesting schedule, a CEO must lean into thoughtfulness. It is through this experience that I have opted to work with thoughtful and caring CEO clients. Without this genuine orientation to people, the most expensive succession plan in the world can still become a missed opportunity.
If you value your bench, don't wait for the board to approve a bonus. Start with the conversation that acknowledges their ambition.