Bob Iger is back as CEO of Disney (photographed in 2018).
There are probably hundreds of qualified candidates for the CEO job at Walt Disney, the media and entertainment giant. So why would the company bring back Bob Iger, less than three years after he stepped down as CEO?
Returning CEOs have had a mixed track record. According to an oft-cited working paper published in MIT Sloan Management Review in 2020, stock prices of companies headed by returning CEOs outperform those of companies with CEOs coming to the top of the organization for the first time. and 10.1% lower.
But some companies have seen success with bringing back former executives. Howard Schultz is back as CEO of Starbucks to rebuild its finances. Steve Jobs was once chased by Apple, but then returned to turn the company, which was on the verge of bankruptcy, into one of the world’s most valuable companies. Michael Dell has re-established himself in the tech industry by re-establishing himself as CEO of his namesake company (where he still is today).
After all, there are some significant benefits to bringing back a former CEO, and in times of crisis it can be tempting to single out an already proven powerhouse.
That’s exactly what Disney is doing right now. On November 20, the company announced the recall of Bob Iger as CEO on a two-year deal, replacing Iger with Bob Chapek, whom he had personally appointed as his successor.
Disney in trouble
The Eiger will immediately begin the mountain of problems. Among other things, problems with Disney’s main distributors Hulu, Disney+ and ESPN+. The streaming business has seen at least three straight quarters of weak or flat subscriptions, and Disney is no exception.
There are also political issues. Iger has to mend his relationship with Scarlett Johansson and other movie stars. Johansson was the lead actress in the 2020 film Black Widow. But when Disney Studios decided to release the film exclusively through streaming rather than in theaters, Johansson sued the company.
The issue has received wide publicity and has signaled the possible conflict between Hollywood studios and big-name actors as the film industry shifts from big-screen theaters to streaming services.
Disney’s so-called “Don’t Say Gay” law enacted by the state of Florida restricts discussion of sexual orientation in schools, promoted and passed by Florida’s Republicans. Law) also stumbled. Disney, led by then-CEO Chapek, was criticized for its poor initial response. Chapek later issued a public apology, especially from the company’s LGBTQ employees.
Iger, on the other hand, has proven management skills at Disney and may be seen as a strong leader in these uncertain times.
No need for new executive training
Speaking of Eiger, he has acquired many brands such as Pixar, Marvel, and Lucasfilm, and introduced Disney Plus in 2019. The day after Disney announced the return of Iger, the company’s stock jumped 10%.
But even investors who pin their hopes on Disney’s stock gains sometimes look to the past. According to co-authors of the aforementioned MIT Sloan Management Review article, the returning CEO is familiar to employees and investors seeking reassurance that the company will be back on track. This fact is often an important factor.
“There’s a strong tendency[in tough times]to go back to being a proven leader.” Gabriel Investments partner Richard Varg, former CEO of Energy Plus and First USA, pointed out in a 2014 interview at the Wharton School of the University of Pennsylvania.
Hiring an experienced CEO is also wise. Iger was the last Disney CEO for 15 years and doesn’t need executive training.
Michael Watkins, a professor of leadership and organizational change at Switzerland’s IMD Business School, told Insider by email that a returning CEO would “know the company from the beginning and understand its shareholders.” has earned their trust,” he said.
Ideally, the returning CEO would have learned more between leaving and returning. “By the time you return to being CEO, you’ll have all the information you need,” says Harvard management coach Carol Kaufman.
There is also the risk of being dragged down by past successful experiences
Critics say Disney’s board was a little short-sighted when it came to bringing Iger back as CEO.
In a Bloomberg opinion column, Beth Kowitt wrote:
“The return of the Eiger raises ever more pressing questions about what goes on in these boardrooms, where we can only think of what has worked in the past and find new alternatives for the future. I can’t
In fact, there is always the risk that returning CEOs will rely too much on past experience.
“They may think they know what to do and how to do it, but the world and the company itself can be very different,” Watkins said.
[Original: Out with the new and in with the old: Why companies from Starbucks to Disney are bringing back their old CEOs to run the companies again]
(Edited by Ayuko Tokiwa)
Source: BusinessInsider
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