Boards are delaying planned executive departures — or, in some cases, speeding up them up — as the pandemic casts an unflinching spotlight on the battle-tested skills needed to deal with tumultuous market forces and shifting strategic needs. CEOs and other C-suite executives who had their eyes on retirement are committing to staying in their roles — or they’re heading for the exits sooner, depending on the company’s situation.
For instance, at international freight supplier Greenbrier Companies, the board announced this month that chairman and CEO Bill Furman would stay in his position for two more years as a way to ensure the “continuity of an experienced leadership team.” Furman has been with the company for 45 years and has served as chairman and CEO since 1994 and as a board member since 1981. He was associated with predecessor companies dating back to 1974.
“The current Covid-19 crisis and accompanying environment of economic uncertainty requires an experienced industry and management team to lead Greenbrier through extraordinary times,” the company said in a statement.
Under Furman’s new employment agreement, he will be paid in fully vested restricted stock units for incentive compensation paid in fiscal 2020 and fiscal 2021 instead of cash. His equity awards will be up to 70% performance-based and the balance will be time-based, with the performance-based awards tied 25% to CEO succession objectives. The remainder will be tied to organization-wide financial goals. He also agreed to a reduced base salary of $800,000, down from $1,050,000.
The company had not disclosed a retirement date for Furman, but he had been focused on expanding the company’s succession pipeline in recent years. In 2017, the board determined that 15% of Furman’s bonus opportunity would be based partially on achieving talent development and succession planning objectives.
Furman’s efforts resulted in the company’s elevating former CFO Lorie Tekorius to president and COO as well as appointing her chair of Greenbrier’s executive management committee. In conjunction with the company’s announcement that Furman would be staying in place, the board announced that Tekorius would be awarded a special, one-time stock grant that would vest over three years. The company said Tekorius took on the COO role last year with no base salary increase.
Furman is expected to retire from all executive offices in September 2022. A spokesperson declined further comment.
At other companies such as Camden National, CDW Corp., Mattel, Michaels Companies, The GEO Group, Woodward and U.S. Physical Therapy, various C-suite executives have delayed imminent retirement plans. Still, it remains unclear what the broader impact of Covid-19 will be on planned C-suite departures and promotions. So far, there hasn’t been a marked divergence between 2019 and 2020. According to data from Equilar, among the 500 largest U.S. companies, known as the Equilar 500, there were 95 C-level departures during the first half of 2019, compared to 93 in 2020.
Still, while the number of executive departures hasn’t changed, some data shows that boards during the crisis heavily nudged CEOs to depart when it became clear that the pandemic would create high-pressure situations that incumbent CEOs might not have been best suited to handle.
Daniel Schauber, founder of CEO-exit research firm Exechange, explains that a wave of CEO departures hit in April 2020, when fears from the pandemic were at a high and market dislocation was still at an extreme. Exechange measures “push-out scores,” which gauge the likelihood that a CEO was or was not forced out of a position. The average is 5, and scores above that figure are considered to mean additional pressure was placed on a CEO to step down.
In April 2020, the average push-out score rose to 7.5, compared to 5.2 in April 2019. It was the highest the score had reached since December 2018. Accordingly, four in five CEOs who stepped down from their posts in April were under strong pressure, according to Exechange research. Boards are highly unlikely to make CEO changes during a time of extreme uncertainty unless it could have a deleterious effect on employees and the company if the change isn’t made, Schauber says.
