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Our Perspective on the News
Earlier this month Disney’s embattled CEO Michael Eisner announced his resignation effective when his contract expires in two years. Although his letter and announcement process was odd in many ways—which in and of itself provided analysts and news commentators with debate fodder—it also brought a typically private topic to light in a very public way. It begs the question “when should a CEO announce his/her retirement/resignation?”
“Who gives a two-year notice? That’s absurd. What’s he suppose to do…go on like nothing has happened?” That was a familiar theme brought forth by the analysts. But what is the right time frame? I think it’s important to distinguish between simply a formal announcement to the investment community (as in Eisner’s case) and a well-executed succession planning process. The analysts are right—a two-year announcement to the investment community is rare. And the analyst community had a right to be surprised—especially since Eisner’s letter left many questions unanswered.
However, for a CEO, or any executive, to be thinking and talking about an intended retirement with key internal advisors and board committees, two years shouldn’t be unusual. Let’s face it, internal leaders below the CEO who see themselves as potential successors are thinking about it years in advance. And their thinking affects their decisions and behavior—not always in the most productive ways. Clearly, there are benefits to companies that have a thoughtful, orderly process for succession planning for all key leadership positions.
Having consulted with companies on succession planning issues for about 15 years, I’m frequently asked the “timing” question and am amazed at how few CEOs think beyond the six-month window. CEOs should be thinking about succession throughout their tenure, not just when they begin to think about their exit and their legacy. Companies should begin a succession planning process at least two years in advance. If you’re not thinking about it and already taking necessary steps to plan for it and to prepare potential successors two years in advance, you’re not operating in the company’s best interest.
Of course, beyond the timing of Eisner’s announcement, there were other oddities that captured my attention. In reading Eisner’s actual letter to the board, I found it interesting that his resignation is understated and almost buried. But then he goes on for two pages about the fabulous accomplishments on his watch and how happy shareholders should be. This could represent one of two things:
It’s a very real possibility that the idea of the letter, and not so much what he wrote, is the result of quiet negotiations with his board… we don’t want to kick you out because it could be damaging for the company, but we want you out… we want you to make it public that you’re on the way out so there are no loop holes, no chance you’re coming back…. The company gets a boost in stock price, shareholders regain confidence that there will be a new day at Disney, Eisner lives his contract out. Everybody’s happy. That’s a very real possibility. It also could pave the way for an early buyout of Eisner’s contract.
But the actual wording of the letter also led me to wonder whether, as a leader, he’s so out of touch that he simply doesn’t see a way out of this. He knows he’s blown it and can’t recover, so he quietly resigns in the letter and then goes on to build the case for why he’s right and everyone else is wrong. He builds the case in a politically astute way, but nonetheless he builds the case for how wrong everyone is about him.
The situation is interesting and will be followed closely by media for what could be two years. So, as they say, stay tuned.