CAVU Resources Inc (CAVR)

[NeverSettle]

Call Bob Silver and have a chat with him. I can assure you the general statement you posted doesn't apply to CAVR, call and find out for yourself. :)


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Southern Gal Friday, 04/16/21 01:48:14 PM
Re: None 0
Post # of 25796

What is an Executive Chairman?

Recently I've been asked by a number of people about CEOs who are chair of the board retiring from the CEO post to become something called an "executive chairman." Kind of confusing given they were always executives. What does this title mean, and how common is it for boards to do this?

What Does This Title Mean?

What it means is that a new CEO will be taking over for the current CEO, and the current CEO will remain on the board of directors as the chairman. In most cases, that current CEO already holds the board chair title. The reason they are now adding the word "executive" in front of "chair" is to indicate the chair of the board will be a company employee and not an "independent" director. This type of leadership succession is actually fairly common, or at least not uncommon.

Why Do Boards Do This?

The reason usually given is that the board wants the outgoing CEO to stay for a limited period of time to ensure a smooth transition to the new CEO. Typically, it's 6-12 months, often with the end date coinciding with the end of the calendar year (e.g., Ginny Rometty at IBM) or the next annual shareholders meeting when directors are elected/re-elected.

There's not an established standard, but anything more than a year raises questions about why this overlap period has to be so long and what level of confidence the board really has in the new CEO they just chose. Bob Iger's plan stay on as chairman of Disney's board for another 22 months would be seen as excessive by most corporate governance experts and an indicator that he'll still have a lot of influence (especially during a crisis) and maybe even come back as CEO if Disney's board loses confidence in Iger's current successor before the end of 2021.

In some of these cases, the former CEO wants to get out of there immediately (no one likes being a "lame duck"), but the board insists that s/he stay for at least a little while longer, either for optics of a smooth transition or because they are insecure about all of that person's institutional knowledge walking out the door so quickly.