Article published in the Philadelphia Business Journal on March 24, 2024.
When an individual is hired to be the chief executive officer of a company, will they have the traditional power and authority of that role as the job title implies? Or, will they be the CEO in name only?
If the founder, major shareholder and former CEO is also the executive chair (versus non-executive chair) of the company’s board, the new CEO may have less power than that of a traditional CEO. Sometimes, it’s hard for the former CEO to let go.
This is the case of Stephanie Linnartz, a former executive at Marriott. On March 13, Linnartz was fired from her position as CEO at sportswear company Under Armor (NYSE: UA) by founder and executive chair Kevin Plank. Linnartz was hired as CEO to turn the company’s business prospects around in early 2023.
A year was certainly not sufficient time for Linnartz to implement her turnaround plan. Plank, who was CEO prior to Linnartz, reassumed the CEO position. The company has been led by four CEOs in four years. It’s hard to imagine the turmoil that has caused the organization. No wonder the company needs a turnaround.
Dave Clark left Amazon to become the CEO of Flexport, a supply chain management company. After about a year as CEO, in September 2023, Clark was fired by founder and executive chair Ryan Peterson. Clark posted on X (formerly known as Twitter), “Founders have the right to change their minds.” Peterson, who was CEO prior to Clark, returned to that position.
The most prominent case of a business executive assuming the role of CEO under an executive chair of the board is that of Linda Yaccarino, who was named CEO of Twitter by Elon Musk in June 2023. Yaccarino was formerly an executive at NBC Universal with broad experience in advertising. Musk abandoned the globally recognized brand name Twitter and renamed the company X in July 2023 to the surprise of many advertising and brand experts. To what extent was Yaccarino involved in that decision?
At the time Yaccarino was hired, the media speculated that she would be CEO of Twitter in name only and that Musk would continue to make strategic and operational decisions at the company. Yaccarino has remained mostly behind the scenes, which is unusual for the CEO of a company with such a large public profile.
In an all-hands meeting shortly after Twitter’s corporate name was changed to X, Musk and Yaccarino addressed their employees. Reading the transcript of the meeting as reported by Wired, it is clear who is in charge at X. Musk dominated the presentation. You would think this was an opportunity for Yaccarino to establish herself as the CEO, but no, Musk had to take center stage, undermining her.
Quoting Investopedia, “A chief executive officer (CEO) is the highest-ranking executive in a company. Broadly speaking, a chief executive officer’s primary responsibilities include making major corporate decisions, driving the workforce and resources of a company toward strategic goals, and acting as the main point of communication between the board of directors and corporate operations.”
How many of these responsibilities were carried out by executive chairs of the board Plank and Peterson, not CEOs Linnartz and Clark? How many are carried out by Musk, not CEO Yaccarino?
So, what’s the impact of a founder/executive chair of the board who is no longer the CEO but remains active in the business? It certainly could undermine the new CEO’s ability to do their job when they don’t have the full powers and responsibilities of a traditional chief executive officer. How do you hold the CEO accountable for results when they’re not the individual calling the shots?
The founder/executive chair can cast a long shadow over the CEO. This can undermine them in the eyes of employees, stockholders and the public as to who is in charge.
A CEO working in an organization with an executive chair of the board is in a no-win situation. If things go well, the executive chair gets the credit. If things go south, the CEO gets the blame and is fired. What talented individual would want to take the position of CEO under these circumstances? It hurts their resume and track record of success.
The ideal organizational model is for the board to be led by a non-executive chair and for executive powers and responsibilities to reside with the CEO. Alternatively, the CEO is also chair of the board, with the board led by a lead director. Under either model, there is no confusion about who is responsible for the chief executive function of the company.
Stan Silverman is founder of Silverman Leadership and author of “Be Different! The Key to Business and Career Success.” He is also a speaker, advisor and widely read columnist on leadership. He can be reached at Stan@SilvermanLeadership.com.
