Don't you love the weasel words that companies choose when chief executives are fired. An axed chief executive officially "retires", chooses to "pursue other opportunities" or "spend time with family". Their expected departure (cough, cough) was part of orderly succession planning (wink, wink).
Unexpected management changes spook customers and shareholders, so boards try to present chief executive departures as planned. The board ensures the chief executive resigns gracefully, even though everybody knows they were sacked and directors detested the individual.
![Nobody questions the damage from weasel words around key departures.](http://web.archive.org./web/20170818215327im_/https://www.fairfaxstatic.com.au/content/dam/images/g/p/v/7/l/q/image.related.articleLeadwide.620x349.gxy04r.png/1502935180293.jpg)
Nobody questions the damage from weasel words around key departures.
A non-executive director, for example, is asked to "retire" from the board because they are incompetent or lazy. In the official announcement, the board thanks the director for their contribution and another unsuspecting board recruits him.
Or an underperforming narcissist who harasses staff is finally sacked. The creep should never have a senior role again, yet his employer blandly announces he has "chosen to pursue other opportunities" and thanks him for his contribution. What an insult to employees.
Don't stakeholders have a right to know the truth about executive departures?
Or should we continue to be insulted by corporate cliches when chief executives resign suddenly, leaving shareholders in the dark because of face-saving or legal reasons?
The Wall Street Journal recently published a story on corporate code for chief executive departures. The story was based on work by a German researcher who wrote an algorithm to examine top executive departures through wording in company announcements.
The algorithm creates a push-out score from zero (voluntary departure) to 10 (forced). Announcements that omit praise for the chief executive or have fuzzy language such as "decided to leave", lead to higher push-out scores. Many scores range in the middle, suggesting chief executives decide to leave after some subtle board encouragement.
It sound's pedantic, but executive and board departures provide crucial information about organisation culture and governance. So much so that investors are reduced to creating algorithms to decipher language around chief executive departures, to gain insight.
Here's a crazy thought: what if companies were open with shareholders when executives and directors resign? I don't suggest a warts-and-all personal appraisal: there can be significant legal issues and angry, sacked chief executives can do significant damage before they go.
But there must be a middle ground where companies can inform the market that the chief executive left for performance issues or because of differences with the board. Investors should know when the board does it job and sacks an underperforming chief executive, not be forced to second guess.
Weasel words force stakeholders to rely on media speculation to form an opinion about executive departures.
Also, shareholders should know when a board chooses the wrong chief executive. Instead, they get useless commentary that the executive is "pursuing other opportunities". Choosing, monitoring and incentivising the right chief executive is the board's top job. When they get it wrong, they should say so, in couched governance terms.
The same is true of directors. A board should be able to say it asked a director to retire. The announcement need not get personal: just a short release that confirms the board asked the director to retire.
Resignations work both ways. Directors should have a mechanism to state they are retiring because of a disagreement with the board or a loss of confidence in it. Such a mechanism should legally protect the director and not jeopardise their governance career. If a director thinks there's a problem with the board, shareholders should know.
My point is: we don't know enough about executive and board departures. Is it the board forcing out the chief executive or is it part of orderly succession planning? Is the director's departure because the board needs a different skill set as organisation strategy changes, or because the director attends too few meetings and barely reads board papers?
Weasel words force stakeholders to rely on media speculation to form an opinion about executive departures. Sometimes the resignation is self-evident to those in the know, such as fund managers who have had special company briefings.
The rest of us would benefit from plain corporate speak, within reason, about issues as important as chief executive turnover and succession planning.
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