Thursday's Market Minute: CEO Exodus

Change starts at the top, and companies have to be willing to shift strategies to stay competitive, or at least out of trouble. A report from Challenger, Gray, and Christmas states that CEO turnover hit 159 in August, an all-time record. Yesterday, WeWork, Juul, and eBay Inc EBAY announced the departures of their CEOs as well. There have been over 1,000 replacements overall just in 2019, to the point that they almost begin to seem expendable.

CEOs are often the most recognizable face of the company, for better or worse, and the ones to take the credit – or blame – for their fortune. For example, when Tesla hits a rocky patch or sinks under the weight of a bad headline, calls begin to oust Elon Musk, but when Tesla Inc TSLA does well, he's named a visionary. WeWork CEO Adam Neumann stepped down after a cluster of pre-IPO problems, including scandals over his personal behavior, but that doesn't fix any of the issues or potential self-dealing plaguing the company. Juul's CEO seems like he took the fall for the health concerns, teen addiction epidemic, and deaths from their product – and was replaced with a tobacco executive, which suggests Juul will continue generally along that well-trod path unless legislation commands otherwise. It makes one wonder why he had to be replaced at all, except for an example of damage control.

It's important to consider the governance of companies you invest in, and how important the CEO is to the perception and performance. Are they a boost, or dragging it down?

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