News that Bob Iger would return to Walt Disney Co. to replace Bob Chapek, his hand-picked successor, pushed the company’s share price higher by 6.3% Monday, its biggest gain since December 2020.
When Howard Schultz went back to Starbucks Corp. for the first time in 2008, replacing Jim Donald, the stock jumped 9% in after-hours trading. When he returned for a second time earlier this year to replace Kevin Johnson, his hand-picked successor, the shares rose almost 5%. At Procter & Gamble Co., when A.G. Lafley came back to replace his hand-picked successor Bob McDonald in 2013, the stock shot up 4%.
The three are part of a long list of so-called boomerang chief executive officers, which includes the likes of Michael Dell and Charles Schwab at their respective eponymous companies, Jerry Yang at Yahoo! Inc., and Myron Ullman at JC Penney Co. The formula in each case tends always to be the same: The beloved CEO returns to his rightful perch in order to get a company that has gone off the rails since his departure back on track. Wall Street rejoices.
On paper, the hero’s welcome makes sense. We’re talking about iconic CEOs synonymous with their companies’ brands, revered for building their organizations into formidable giants in their industries. Who wouldn’t want to see these men (it does seem primarily to be men) have another go at it, especially when a company is floundering. And yet each executive at one point or another really botched what’s arguably their most important job: securing a replacement who can figure out how to run the place when they’re gone. Boomerang CEOs are celebrated as saviours when really their return should be viewed as a failure in leadership on both their part and their boards’.