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How CEOs Work


The Problem of Losing a CEO

Car accidents, heart attacks, cancer. As much as we hate to think about it, no one lives forever. If a CEO is truly successful, he or she won't outlive the corporation itself. And, CEOs may also choose to leave the company suddenly to go another organization, to pursue other exploits or retire. Of course, the board can always fire the CEO as well.

Whatever the cause, when a company loses a CEO, it can be like the frenzy of a chicken running around with its head cut off. That's because of the problem of CEO succession -- in other words, deciding who will be a suitable replacement. Just as monarchies have struggled historically with the death of a king who has no strong or obvious successor, so must companies struggle with the departure of a CEO. If companies aren't careful, what plays out is the stuff of Shakespearean drama. In fact, in the 2000 motion picture release of Shakespeare's "Hamlet," which deals with problems of royal succession, filmmaker Michael Almereyda modernized the plot to revolve around the death of a CEO in place of a king.

So why is naming a new CEO such a big deal? Why was the health condition of Steve Jobs former Apple CEO, front page news in the tech world? Basically, it's because of the reasons we laid out on the last page -- the CEO is the lifeblood of a company. He or she sets the direction of a corporation, and shareholders don't want to hold on to the stock of a directionless company for long. Jobs himself is a great example of this because many credited him with saving Apple from the brink of bankruptcy and subsequently raising it to enormous success. Jobs stepped down from the role of CEO in 2011 and passed away in October of that year. Now that he's gone, some fear the company might sink yet again. To see evidence of how much a company hinges on its CEO, note how Apple's shares dipped at the mere rumor of Jobs' remission into ill health [source: Reuters]. In January 2009, news surfaced of Steve Jobs taking a leave of absence from his position at Apple. The announcement was enough to institute a temporary halt on the trading of Apple stock. To calm investors, Jobs appointed COO Tim Cook to take over daily operations for him during his leave. Today, Tim Cook is the official CEO of Apple. On Oct. 6, 2011, the day after Steve Jobs passed away, Apple stock dipped 7 percent in early trading before rebounding to just 0.23-percent lower than its closing price on Oct. 5, 2011. Even though Jobs was no longer CEO at that point, his death had a large impact on the company.


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