"A leader who has ascended to the level of CEO contender is likely a high performer with broad institutional knowledge and deep relationships, both inside and outside the firm. Such a star walking out the door can scramble organizational operations, ruin team morale, and dent a company's bottom line. Top executive turnover typically costs many multiples of the person's annual salary."
"A recent report from consultancy FW Cook found that the grants have 'a strong, but limited, retentive effect-typically lasting approximately two to three years.' That time frame likely reflects the awards' vesting schedules, says Marco Pizzitola, a consultant at FW Cook and coauthor of its new report."
"Companies were more than twice as likely to hand out the grants if they hired external CEOs, suggesting 'there's greater concern' about an executive exodus with an outsider chief."
When major corporations select new CEOs, they frequently offer significant compensation packages to executives who competed for but did not secure the position. Disney granted Dana Walden over $32 million in combined compensation after Josh D'Amaro was chosen as CEO, while Morgan Stanley distributed $20 million bonuses each to three runner-up executives. These retention packages address the substantial costs of losing high-performing leaders with deep institutional knowledge and external relationships. Research from FW Cook examining 100 large-cap companies found that roughly one-third of those replacing CEOs between 2016 and 2020 provided retention grants to unsuccessful internal candidates. While effective at retaining talent, these grants typically maintain their retentive effect for only two to three years, aligning with standard vesting schedules. Companies are more than twice as likely to offer such packages when hiring external CEOs.
#ceo-succession #executive-retention #compensation-packages #talent-management #corporate-leadership
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