CHAPTER 03 CEO Succession Trends and Best Practices
Spotlight: Air Canada and Amazon: Orderly Succession Planning and Communication Pay Dividends
– CEO to board chair. An important element in Amazon’s succession process was Bezos’ continued role as board chair following his departure, which is consistent with other recent successful transitions such as MasterCard Inc. and Merck & Co., Inc. This likely helped bolster shareholders’ confidence that Bezos would retain significant influence in shaping the company’s future, which is particularly important for companies like Amazon with a founder-CEO. The approach of Air Canada and Amazon highlights the benefits of following a thoughtfully planned and well-communicated succession process. Notably, both companies experienced only slight changes in their respective share prices upon announcing the planned transition. Amazon’s share price dropped just 2% on the date of the announcement, and Air Canada’s share price increased by 1%. In contrast, the announcement of the departure of TSX-listed Lightspeed Commerce Inc.’s CEO, Dax Dasilva, in February 2022, led to a drop in share price of over 16%. Investors reacted negatively to Lightspeed’s failure to telegraph that a management change was in the works. In addition, the timing of the change occurred during turbulent events for the company because it was in the midst of integrating acquisitions and was under a short-seller attack. These case studies demonstrate just how far clarity and consistency can go in fostering shareholder confidence and allaying fears that frequently arise in the context of CEO successions.
Among the most notable and high-profile CEO exits in recent times, Calin Rovinescu’s departure from TSX- listed Air Canada and Jeff Bezos’ departure from NYSE- listed Amazon.com, Inc., both in 2021, rank at the top of the list and exemplify several best practices regarding succession planning: – Ample notice. Both Air Canada and Amazon provided considerable advance notice of their planned CEO successions. Air Canada gave the market 122 days to digest the news of Rovinescu’s retirement, and Amazon provided a lengthy 153-day notice period of Bezos’ resignation. These extensive runways not only facilitated a smooth transition but also represented clear signals to shareholders and other stakeholders that they could have confidence the companies were organized and well-prepared for a leadership change. – Internal hires with consistent visions. Air Canada and Amazon both appointed successors from within their respective internal ranks. Air Canada tapped Michael Rousseau, then-CFO and deputy CEO, and Amazon promoted Andy Jassy, then-CEO of Amazon Web Services. Both brought significant experience to the table through either a former crucial C-suite role or after leading one of the company’s major business segments. Both incoming CEOs were lauded for having a vision and an outlook for the future of their respective companies that were consistent with those of their predecessors. This alignment helped alleviate any potential concerns that the companies were on the verge of major (and potentially highly disruptive) strategic shifts.
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