• Market Crumbs

CEOs Having A Rough 2019, But They'll Be Just Fine

2019 continues to be a bad year, in terms of losing their jobs, for CEOs. Whether willingly or unwillingly, it seems like the CEO of a major corporation is being axed on a weekly basis.

Last night, it was McDonald's turn to join the party. The company fired CEO Steve Easterbrook, who had been president and CEO since 2015, following an inappropriate relationship with an employee. McDonald's board, which voted in favor of the move on Friday, said Easterbrook "violated company policy and demonstrated poor judgment involving a recent consensual relationship with an employee."

Shares of McDonald's, which is transforming into a technology company that sells hamburgers, increased 96% under Easterbrook's leadership. Easterbrook sent one final email saying "This was a mistake. Given the values of the company, I agree with the board that it is time for me to move on."

McDonald's joins a long list of companies that have seen their CEOs exit this year, whether through retiring, firing or resigning to "spend time with family." The CEOs of Nike, eBay, Wells Fargo, Under Armour, WeWork and Juul are just a few of the notable examples of CEO exits this year.

As a matter of fact, 2019 is on pace to be a record year for CEO departures. According to Challenger, Gray & Christmas there were 1,160 CEO departures from U.S.-based companies through September, which exceeds the previous year-to-date high of 1,132 through September 2008. August saw the highest monthly total of CEO departures on record with 159 head honchos heading for the exit. September wasn't much better, with 151 CEO departures.

"With growing uncertainty surrounding global business and market strength, the fact that so many companies are choosing this moment to find new leadership is no coincidence," said Andrew Challenger, Vice President of Challenger, Gray & Christmas.

It's not just the name of a company's CEO that is changing at a record pace. Companies are increasingly separating the roles of chairman of the board and CEO, two positions that are often held by the same person. According to Institutional Shareholder Services, 53% of S&P 500 companies now split the two roles, up from 30% in 2005.

So before you feel too bad for these CEOs, remember they still make enough in a year to last them a lifetime. In 2018, CEOs of companies in the S&P 500 earned, on average, $14.5 million in total compensation. For these same companies, the CEO-to-worker pay ratio was 287 to 1. It's likely Easterbrook will be quickly forgotten in the not too distant future once the next CEO is ousted.

Leftover Crumbs

  • More like under investigation. Under Armour, whose founder and CEO recently announced he will be stepping down, is reportedly facing a probe into its accounting practices. Officials from the Securities and Exchange Commission and the Department of Justice are investigating whether the company's revenue recognition practices made the company's sales appear stronger than they were. The company said it is cooperating with investigators in the probe, which has not yet been publicly announced. The news of the investigation comes just one day before Under Armour reports earnings this morning.

  • That's about 23 times the size of Apple's market capitalization. According to the Treasury Department, the U.S. national debt has surpassed $23 trillion for the first time. $17 trillion is debt held by the public with the remaining $6 trillion consisting of loans within government bodies. Michael A. Peterson, CEO of the Peter G. Peterson Foundation said "Reaching $23 trillion in debt on Halloween is a scary milestone for our economy and the next generation, but Washington shows no fear. Piling on debt like this is especially unwise and unnecessary in a strong economy."

  • Believe it when you see it. Saudi Aramco, the world’s largest integrated oil and gas company, announced it will proceed with its IPO via a domestic listing. The state-owned company, which is the most profitable in the world, has delayed its IPO over the last few years. Details such as timing, pricing and the number of shares to be offered were not disclosed. Saudi Aramco could end up being the world's largest IPO if it exceeds $25 billion, which was previously set by Alibaba's IPO in 2014. "Today is the right opportunity for new investors to reap the benefits of Aramco’s ability to achieve value, and boost it on the long-term," said Aramco Chairman Yasir Al Rumayyan.

  • How will it affect trade talks? The U.S. government has launched a national security review of ByteDance Technology's $1 billion acquisition of U.S. social media app Musical.ly, which eventually merged into TikTok. Critics of TikTok, the video-sharing app which has quickly grown in popularity, worry it is censoring content and could share sensitive user data with the Chinese government. The investigation comes just a few days after U.S. Senators Charles Schumer and Tom Cotton asked the director of national intelligence if TikTok could pose a "national security risk" to the United States.

  • Tell us how you really feel. The Association of Professional Flight Attendants, American Airlines' flight attendants union, sent a letter to Boeing CEO Dennis Muilenburg regarding concerns they have about the safety of the ill-fated 737 MAX. The letter read "The 28,000 flight attendants working for American Airlines refuse to walk onto a plane that may not be safe and are calling for the highest possible safety standards to avoid another tragedy." American Airlines operates 24 737 MAX, making it the second-largest operator of the troubled plane in the U.S.