Last night at the Republican National Convention, New Jersey Gov. Chris Christie proclaimed that leadership is not about reacting to poll results, but creating those poll results. I can agree with Chris Christie about the importance of presidential leadership. (Though, Michael Douglas also said this while playing a President in one of my all time favorite movies, The American President. Which is neither here nor there.)
But not reacting to polls is easier said than done when a mere four years later, regardless of your party affiliation, you have to run for reelection.
Could this also apply to CEOs? As shareholder activism and influence continues to grow, public company CEOs may find themselves in a similar situation, and not just every four years, but annually. CEOs have always worked for the shareholders, but judgment of their performance was largely governed by the Board of Directors.
With the emergence of Say on Pay, and other shareholder assertiveness, however, a new dynamic is developing. Take, for example, WellPoint’s announcement that the CEO is stepping down largely due to shareholder demands, with no one waiting in the wings to take her place. A CEO’s abrupt departure, without a new CEO already in place to assume control, used to be reserved for situations of malfeasance, misconduct, or personal situations, like illness. Certainly, a smooth and planned transition of power to a new leader is preferable in most situations. But we’re seeing it happen more and more under pressure of investors. While investor pressure has always played a role in leadership changes, rarely have we seen it played out so publicly and transparently.
Does this signal a new era of corporate governance and proxy fights, where CEOs will need to “campaign” for their compensation? Go on investor listening tours, working to shore up support to keep their jobs? Will annual meetings look more like political conventions, with grandstanding surrogates and investors as delegates? Or will an eventual, positive change in the economy let some of the air out of the activist shareholder sails? Would love to hear your thoughts…