Ready, fire (the CEO), aim.

• Author: SODER, DEE
• Position: Chief executives leaving companies as economic downturn takes toll - Statistical Data Included

Are directors being wiser, or just more active? Is Wall Street calling the shots?

THE ANALYSTS ARE NEGATIVE, sales are down, profits are eroding, and the stock is falling ("going south" is not a favorable analogy, even more so since the Florida voting debacle, regardless of your politics). Wall Street is demanding action. And directors are listening! Chief executives are leaving more rapidly every day; their hasty departure made easier by enviable severance terms. Analysts applaud a CEO termination and the stock improves (hopefully).

A recently terminated CEO was telling me that it felt like the Roman Empire all over again, with him as the gladiator and the "markets giving a thumbs up or thumbs down." A director of another board sent a redlined copy of "How To Avoid Firing Your CEO" (DIRECTORS and BOARDS, Fall 1999) to me and CEO Perspective Group partner Richard Clarke, the article's author, noting that the board had followed the Early Warning Signs® in our article and replaced their CEO. While honesty is the best policy, I decided this was not the time to be advising the CEO of his judgment failures or telling the director that the board probably could have given guidance earlier and avoided a CEO termination. However, these conversations did underscore several similar discussions with clients and colleagues regarding Wall Street's dominant role in the boardroom.

Wall Street's importance is greater in uncertain economic times, but is it a signal or a cause? More specifically, are directors more alert to signs that the CEO is failing and acting expeditiously to remove him or her? Or are directors emboldened by a market downturn and replacing the CEO hoping for an upturn in stock price? Expert opinion and data exist to support either possibility. We decided to investigate.

The last few months we've been analyzing CEO departures from major and mid-cap companies to obtain the answer. We've used interviews, media reports, analysts, plus insights from bankers and lawyers to obtain information. With many directors being good friends and CEO Group clients, we had unusual access to information. (Caution: While we at CEO Group are versed in multivariate analysis, boardroom decisions concerning CEO severances are extraordinarily complex and confidential.) More problematic for any rigorous analysis is that even directors on the same board frequently cited very different factors leading to the CEO's termination.

At this writing, the CEO Group has...