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05001,0002002 2005 2010 2015 20181,500 1,452AVERAGEANNUAL CEO DEPARTURESSOURCE: CHALLENGER, GRAY & CHRISTMAS46
FORTUNE.COM// FEB.1 .19IN RECENT YEARS, few corner offices
have had doors that revolved as
fast as Mattel’s. The toymaker has replaced its
CEO three times since 2015—most recently
last April, when former Google executive
Margo Georgiadis stepped down from the
post, to be replaced by Ynon Kreiz.
The turmoil isn’t surprising: After all,
Kreiz’s predecessors weren’t able to stanch
the decline in Mattel’s revenues, which
dropped 23% from 2014 to 2017. With brick-
and-mortar retail partners like Toys “R” Us
struggling or collapsing under the Amazon
onslaught, Mattel has fewer sales outlets, even
as the ranks of its competitors grow. And Mat-
tel’s stock price, to borrow a phrase from one
of its vintage games, has gone Ker Plunk.
But investors can find reason for hope
in Mattel’s most recent leadership change.
There’s growing evidence that CEOdepartures
that are driven by a wider strategic realign-
ment often result in substantial improve-
ments—for the business and its shareholders.
These days, investors have many more
changes than usual to consider. According tooutplacement firm Challenger, Gray & Christ-
mas, 1,452 CEOs at U.S. companies with more
than 10 employees left their jobs in 2018—a
25% increase from 2017 levels and the largest
wave of departures since the 2008 recession.
About a quarter of those leave-takings were
classified as retirements, and a handful were
driven by #MeToo issues and other mis-
conduct. But the high turnover also reflects
businesses coping with a changing economic
environment in which recessionary trends
have begun to undermine their earnings and
share prices.
Amid all this disruption, there’s one cat-
egory of CEO change with potential to be par-
ticularly profitable. A recently published study
indicates that in situations in which the CEO
and the board disagree on strategy, leading to
the chief executive’s resignation or dismissal,
companies are more likely to see a meaningful
performance boost over the long term.
The study’s authors found 97 cases between
1995 and 2012 in which a CEO was forced to
leave a position owing to a disagreement over
strategy with the board. Improvement doesn’t
happen overnight, explains
coauthor and University of Mis-
souri finance professor Kuntara
Pukthuanthong: The business
problems and public disagree-
ments surrounding the depar-
ture often depress the company’s
share price for the 12 months
after the turnover. Over the en-
suing years, however, such busi-
nesses narrow the gap. Pukthu-
anthong’s team found that three
years after the change, stock
performance for companies in
the group was back on par with
their industry’s—rewarding
those who took a chance on the
stocks at their nadir.
One reason for the success has
to do with the way companies
reoriented around longer-term
goals after many leadership
changes. The new hires the team
studied were more likely than
their predecessors to get more
of their compensation in the
form of long-term incentives,
like restricted stock options,INVEST
GOODBYE ...AND GOOD LUCK?
In 2018 the S&P 500 had its first down year since 2008. Not coincidentally,
American CEOs left their jobs at a near-record pace.GRAPHIC BYNICOLAS RAPP