From Twitter to Tinder, these companies gave their CEOs a second chance. Here’s why.
On November 20, 2022, just two years after serving as Disney’s chief executive officer (CEO), Bob Chapek was fired from his position and the former CEO, Bob Iger, was re-hired to take his place. The company saw a 6.3% hike in stock prices soon after the announcement, which makes it pretty clear that investors were happy with Disney’s choice to re-hire Iger.
While this story might seem very unusual to the general public, it is a common phenomenon in the corporate world. Known as boomerang CEOs, there have been several instances where high-profile business leaders have been re-hired by their former employers. Here is a list of three CEO rehiring stories from the tech space.
The founder of the social media site Twitter, Dorsey has been removed from his position as CEO more than once. Dorsey had founded the company in 2006, but just after two years of being at the helm, he switched positions with his co-founder Evan Williams. The reasons behind his dismissal are unclear, but there have been several speculations. These included his focus on hobbies, frequent partying, arguments with Williams and lack of communication with the investors.
In 2015, Dorsey reclaimed his position in the company. According to Willams’ Medium article, Dorsey has a “connection to its [Twitter’s] roots informs a depth of vision and authenticity of voice,” which could perhaps be the reason why he was urged to lead the company as CEO again. Alternatively, there are theories that he was re-hired because of his efforts to make himself seem like the sole visionary behind the company all the while, thus spinning the rumor mill against Williams.
From 2015 to 2020, Dorsey led the company. But, in 2021 he was replaced by the company’s former chief technology officer (CTO) Parag Aggarwal. This time it was because activist investing hedge fund Elliot Management had bought US$1 billion worth of Twitter stock and was demanding the removal of Dorsey from the CEO position. As of 2022, with Elon Musk taking over Twitter, Dorsey has stepped down from the board of directors of Twitter and made a statement that he would never return as the CEO of Twitter again.
Michael Dell is the founder of the American tech company Dell Inc. and was leading the company as the CEO since its inception in 1984. In 2004, Dell left the CEO position and was replaced by the company’s president, Kevin Rollins. According to the company’s official statement, the change in the CEO position had been made to better reflect the roles Rollins and Dell already played. Dell had been handling the technology and customer demand while Rollins took care of the strategy and operations aspect. From then on, Dell was the chairman while Rollins led as CEO. However, in 2007, the company had a particularly rough year. Dell lost its spot in the PC market and also underwent an investigation by the Securities and Exchange Commission (SEC). All of this put strain on Rollins to resign from his post.
The CEO position then went back to Michael Dell and has remained with him since. Under his leadership, Dell went from being a publicly traded company to a privately held company. Up until 2018, Michael Dell held most of the company’s Class A shares and had the privilege of vetoing any attempt to remove the CEO. Eventually, the company re-listed itself on the market and became public. Even though the company is public now, Dell holds 49% of the shares and 66% of the voting power, effectively securing his spot as the CEO as long as he wishes to hold it.
Sean Rad is the co-founder of Tinder, one of the biggest dating platforms in the world. He was the company’s CEO from its inception in 2012 but was ousted from his position in 2014 because of his involvement in a sexual harassment lawsuit. Rad’s fellow co-founder and former vice president of marketing Whitney Wolfe had filed a sexual harassment lawsuit against Rad and Tinder’s chief marketing officer, Justin Mateen. In it, Wolfe had alleged that Mateen had sexually harassed her and that Rad had ignored her complaints about the same. The case was eventually dropped with Wolfe getting an out-of-court settlement of US$1 million and Mateen resigning from his post.
Even after the lawsuit had been dropped, Rad left the company in March 2015. He was replaced by Chris Payne, a former eBay and Microsoft executive. Payne was removed from the post just six months after taking over as CEO because Tinder’s board of directors believed that he wasn’t a good fit for the company. With that, Rad returned to his position as CEO only to step down again in 2016. This time, he was moved to a sub-division of Match Group (the company that owns Tinder) called Swipe Ventures, which was focused on acquiring other companies.
Are Boomerang CEOs a good thing?
The one thing all these stories of boomerang CEOs have in common is that the co-founder/founder are the ones who are being reappointed to the posts. Two of these reappointment stories (Rad and Dell’s) were a result of the replacement’s inability to deliver the right results or be a good fit for the company.
But just because the replacement is a bad fit doesn’t mean that reappointing the former CEO is always a good choice. According to a 2020 study published in the MIT Sloan Management Review, companies that opt for boomerang CEOs have a 10.1% lower stock performance than companies where new people are appointed to the post.
So, if you are thinking about re-hiring your CEO, it is important to consider the following questions—has this person been successful at what they were doing since they left the company? What led to their removal? Have those conditions changed? Make sure to put due diligence into the re-hiring process so you don’t have to remove the CEO all over again.
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