In the hierarchies The position of "Chief Executive Officer" is no longer clear from Corporate America. Whoever holds the CEO title is at the top of the organizational chart. it's right there in the capital C. But what happens when this label – and the power attached to it – is shared?
This is the unusual experiment that several companies have conducted in the past few months, in which the role of CEO has been split between two executives. In September, WeWorks' parent company appointed two interim CEOs, Sebastian Gunningham and Artie Minson, as successors to founder and spiritual guru Adam Neumann, who stepped down when the competitive giant in the shared office postponed its IPO. (The couple will be replaced by a single new CEO, Sandeep Mathrani, in February.) Software giant SAP appointed Jennifer Morgan and Christian Klein co-CEOs in October – the third time the German company has opted for the dual leaders – Agreement has been decided. And in January, the baggage startup Away ended with two CEOs after former boss Steph Korey returned to run the company just a few weeks after reports of toxic work behavior. She now shares the position with Stuart Haselden, the former Lululemon manager whom Away originally tapped as Korey's only replacement.
Can such power-sharing agreements be successful? Some management experts are skeptical, but the data, however limited it may be, suggests that they can do so under the right circumstances.
Fortune has been keeping an eye on the Fortune 1000 co-CEOs since 1997 when there were six couples. Since then, the number has fluctuated sporadically, peaking at 15 when our Fortune 500 edition was released in 2000, and fell to a level in 2007 and 2008. When we ran our 2019 census, the number was 13, and companies like Salesforce (Marc Benioff and Keith Block), Nordstrom (Erik Nordstrom and Peter Nordstrom) and Markel (Thomas Gayner and Richard Whitt) use the co-CEO model.
Regardless of its rotations, the figure represents a tiny fraction of the Fortune 1000 universe. Emma Zhao, a management professor at the University of Virginia, says there are good reasons for this. Her research concludes that the structure of the co-chief executive "is probably not a good thing," she says. With co-author Lindred Greer at the University of Michigan, Zhao conducted studies on how groups negotiate and found that “when people with higher powers work with other people with higher powers, destructive power dynamics can occur that affect group performance compromise ". Paranoia creeps in when Bigwigs fear that their peers will be threatened by their peers. This can lead to "preventive power movements against others in the group". People in top jobs are not used to reviewing every decision with someone else, she says. "It is difficult for them to be in this trusting relationship."
Certainly there have been some dramatic breakups of the co-CEO in the past, for example when Jon Corzine gave control of Goldman Sachs to his co-CEO Henry Paulson abruptly before his IPO in 1999 or the chaotic power struggle between Sanford Weill and John, Reed at Citigroup, which led to Reed's departure in 2000. Martha Stewart Living Omnimedia's chairman said that there was “tension” behind the decoupling of his co-CEOs in 2008, less than a year after their appointment. And Publicis and Omnicom abandoned a merger in 2014 that would have created the world's largest advertising company, in part due to a clash of CEO egos.
The statistics also indicate that the co-CEO structure is more volatile. The average duration of co-CEO partnerships in the Fortune 1,000 is 2.1 years. Compare this to the mean tenure of Fortune 500 CEOs last year: 4.9 years.
A common measure of the CEO's tenure, however, is equity performance versus the broader market. When Fortune examined this number for co-CEOs, she told a more nuanced story. The mean total return on the 57 co-CEO stays at Fortune 1,000 since 1997 was 28%, while the average total return for the S&P 500 was 14% over the same period.
Given the small sample size, it is of course limited how much can be read into this data. However, Matteo Arena, a finance professor at Marquette University, believes it is just as misleading to place too much emphasis on the unique anecdotes about feuds by co-CEOs. In fact, his research on Cochiefs suggests that the arrangement "works quite well" for companies that choose it.
The 2011 study conducted by Arena with two co-authors showed that the market responded positively to the appointment of co-CEOs and that their presence "had a positive effect on the market value of a company". This works best for family businesses, situations where the co-CEOs are founders, after mergers (when one leader from each company becomes a cochief) and in cases where additional governance is required, Arena says. Maybe an existing CEO is “great at ideas” but has other weaknesses, he says, citing the away drama. In such a situation, the CEO could “work with a colleague, not just a board that meets a few times a year”. Zhao adds that the co-CEO model is a way for a company to signal that it is introducing more checks and balances, which is why the agreement may result from a corporate crisis.
Despite the positive results of his research, Arena admits that the co-CEO model "shouldn't work for all companies or even the majority of companies". The shared structure is still a big challenge because "CEOs need to be able to participate and accept the agreement," he says. And even with the evidence, it is difficult to persuade an experienced guide to share.
Top-class co-CEO hits …
KKR co-CEOs Henry Kravis and George Roberts
The cousins have run the company together for 44 years and have achieved a total return of 388% since their IPO in 2010.
… and missing
The former co-CEOs of Martha Stewart Living Omnimedia, Wenda Harris Millard and Robin Marino
Called cochiefs in June 2008, the pair collapsed in less than a year. The company's stock underperformed the S&P 500 during its short tenure.
By the numbers
Number of CEO pairs who worked at Fortune 1,000 in 2019.
28% vs. 14%
Average total return since 1997 for Fortune 1,000 companies led by co-CEOs compared to the S&P 500.
2.1 vs. 4.9 years
Average term of office for Fortune 1,000 co-CEOs compared to average term of office for Fortune 500 CEOs.
A version of this article appears in the Fortune March 2020 issue, titled "Are Two CEOs Better Than One?"
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