Business Reporters Focus on CEO Turnover

"Musical chairs" seems to be the game of choice for many of the nation's top CEOs.

The appointment of President Robert Iger to succeed Michael Eisner at Disney and the resignation of longtime AIG chief Maurice Greenberg have dominated many business sections the past two days. Add to that list the recent departures of Boeing's Harry Stonecipher and Hewlett-Packard's Carly Fiorina, and it's easy to see why the investing public is on corporate turnover watch.

Although Disney courted the services of others, including eBay CEO Meg Whitman, the eventual replacement for Eisner was conveniently found in the entertainment giant's own backyard.

Following the announcement, the New York Daily News focused on shareholder displeasure with the internal appointment.

"Iger's appointment immediately set off another attack from dissident shareholders Roy Disney and Stanley Gold, who found it 'incomprehensible' that the board could not find a single suitable candidate outside the company and 'thus handed Bob Iger the job by default'," Daily News business writer Phyllis Furman wrote. "They called on shareholders to consider replacing the board."

Many reporters on the West coast focused on Disney's inability to land Whitman, a former Disney employee herself, and the trickle-down effect on eBay.

"The fact that (Whitman) interviewed with the world-famous media and entertainment conglomerate in the first place has left eBay watchers wondering whether Whitman is finally considering a new career," reported Michael Bazeley in the San Jose Mercury News. "T he disclosure also raised fresh, albeit fleeting, uncertainty about the future of the online auction company, whose success has been so closely identified with its famous CEO."

A primary focus for any executive departure is the reaction of shareholders. Keep an eye on how company stock reacts to the departure, and then eventual, replacement of a corporate CEO. How the stock is trading once the new director is named is a solid indicator of how those closest to the company view the direction. In Disney's case, shares rose close to 1 percent at the end of business Monday. AIG shares did not fare as well, falling by 1.3 percent after the closing bell sounded.

With respect to Greenberg, there is quite a bit of history to consider. Amid mounting regulation inquires, the 40-year veteran of AIG was eventually pushed out by the company's board of directors.

"Yesterday's departure underscores a new inclination among directors, even those serving alongside an executive as entrenched as Mr. Greenberg, to move quickly to correct problems, both real and perceived," according to Gretchen Morgenson in The New York Times. "Mr. Greenberg's exit was more momentous than the recent departures of other chief executives because he and A.I.G. were synonymous."

Another issue to consider when reporting on a CEO vacancy is how main competitors are reacting. Investigate whether they are trying to capitalize on any perceived vulnerability of their rival. They may position themselves to win over any business contracts and/or investor confidence they view as susceptible.