Shortly after news of his return to the corner office at Disney, the stock appreciated roughly $10 billion in one day -- on the basis of just the announcement of Bob Iger's return as chief executive officer. I love Bob too. But the truth is, he screwed up.
Let's not forget, in addition to being the CEO of Disney for many years, Iger was also the chairman of the board. And let's also not forget that any board of directors' number one responsibility is CEO succession planning. So, what happened? Why was CNBC pundit Jim Cramer eviscerating Bob Chapek on live TV? Why did the Disney board have an emergency meeting to discuss Chapek's future? And why was he subsequently fired? That's a dramatic change of heart for an all-star board that just recently awarded Chapek a rich three-year deal.
We are all familiar with the wildly popular TV show Succession. Viewers must sometimes think this Shakespearean drama is completely fictional. It isn't. Sometimes real life is even more entertaining to watch than Hollywood's version. Lots can go wrong during the CEO succession process -- because all human beings, especially corporate leaders, are deeply flawed, despite their amazing capabilities and track records. And that's a problem because the CEO has immense power, makes the most important decisions, and is the figurehead of the entire organization. So, what can go wrong behind closed boardroom doors during the CEO succession process? How do board members miss personal flaws of top candidates, when they seem so glaringly obvious ex post facto?
First, individual board members often rely on first impressions when they meet a "rising star," charismatic, extroverted candidate in the company who is angling to become the next CEO. That's a big mistake. A charismatic superstar in a company may be erroneously seen as a natural leader or as a bold innovator. Whereas in truth, often introverts are more strategic, data-driven, reflective, and self-aware. Board members should never simply trust their "gut" feelings or first impressions. Instead, they should enlist objective, third-party experts to conduct multi-data-point assessments that thoroughly examine leadership potential, core values, and leadership style -- those incredibly hard to measure soft skills that can make or break a future CEO. Second, as completely counterintuitive as it sounds, boards should start the CEO succession process almost immediately after appointing the incumbent CEO. Most boards wait until it's too late. This is another big mistake. If the company is performing well, boards don't want to rock the boat and send a false signal that the incumbent CEO is not up to par. A strong board -- and a confident incumbent CEO -- will push hard to start the succession process very early, often five or more years in advance of the next CEO announcement. An early start also gives the board more quality time with a broader range of diverse candidates and lets them see how they perform and how they improve over time. A positive, upward trajectory over time is key.
Third, boards often get enamored by external superstars who are seen by some board members as their future corporate savior. "They did so well at their last company, I'm sure they can save ours, too," board members often say to themselves. No two companies are the same -- all of them have wildly different competitive strategies, corporate cultures, and corporate regulators, not to mention a network of totally different suppliers and customers. A leader who was incredibly successful in one context may fall flat in another. It's sheer laziness and naivety for any board member to be seduced by the prospect of a corporate savior. They don't exist.
And fourth -- and perhaps most important and least discussed (it's a dirty little secret) -- boards don't create a safe space environment for future CEO candidates to be vulnerable. There is a disconnect between rhetoric and reality. Most board members say they want to really get to know top prospects inside their company: the good, the bad and the ugly. After all, everyone agrees there is no such thing as a perfect leader. Even the best rising stars have room for improvement, boards reason. It's just common sense to get to know the development needs of top prospects and monitor their progress over time.
Yet this rarely happens. Instead, candidates are invited to a very small handful of formal board presentations and preplanned dinners. How many candidates -- who, let's not forget, know they're on the board's radar -- are going to spend that limited and precious time talking about their "weaknesses"? All of us have a natural human instinct to steer clear of these kinds of land mines and steep cliffs. Can you imagine a viable CEO candidate, who has overperformed her entire life, confiding in a board member, "Well, I'm a hard worker, but I lack self-awareness" or "I project self-confidence, but deep down I have some serious insecurities"? It just doesn't happen, and it's mostly the fault of the board.
Boards need to think more creatively about how to make a more psychologically safe space for these kinds of conversations. They should encourage and respect candidates who are willing to be vulnerable, have hard conversations, and confront head-on their development needs and action plan for improvement. One thing is certain. If these messy issues are swept under the rug, they will absolutely rear their ugly head at the worst possible time.
I can only imagine there was a lot of dirt and dust under Disney's beautiful rug in the corporate boardroom. Now that Bob Iger is back, I can almost guarantee he is already starting a deep-clean.