Two CEO’s leading a company together, so-called co-CEO’s. Oracle, Salesforce and SAP all went for it but recently decided to abandon the idea and go for just one CEO. SAP leaves the concept after just six months. Can we conclude that the concept of co-CEO does not work?
Too many cooks in the kitchen. The saying is a lot older than all IT organisations in the business. Yet we saw a trend emerge in the IT market that large IT companies opt for co-CEOs. When choosing this structure of co-CEOs, two people manage the company. This provides challenges, especially for the two people in the role of co-CEO. It requires certain qualities not everyone possesses.
- The tasks need to be well distributed;
- The co-CEO’s need to stay up to date of each other’s activities ;
- There’s no room for egos;
- Both co-CEOs have to work just as hard;
- Both co-CEOs need to get along very well;
- There has to be a predetermined scenario of what would happen if the co-CEOs didn’t agree on which direction to take;
- It should be clear to employees which co-CEO has which tasks. You have to prevent people from playing the co-CEOs off against each other, which is why consultation between the co-CEOs is so important
These are just several issues that emerged in our research as possible pitfalls and challenges. Ultimately, the real-life examples paint the bigger picture. In the past few months, we have seen three large IT companies stop using the co-CEO structure. All three are listed companies that made a brief statement explaining this is better for their futures. However, they never tell us why that is the case.
At Oracle, they had two co-CEOs, Safra Catz and Mark Hurd. Catz also fulfilled the role of CFO, so there was a clear division of roles. Of the three companies we are discussing, Oracle seems to be the most suitable for a co-CEO position. This is because Larry Ellison is also very active in the company as founder, CTO, chairman of the board and major shareholder. Ellison could always give a definitive vote if the co-CEOs did not agree on a subject.
Last October, Mark Hurd passed away due to health problems; the exact cause has never been disclosed. After his tragic death, rumours arose about the search for a new co-CEO. In December Ellison announced that there were no plans for a new co-CEO. Catz is now the sole CEO of Oracle, which she combines with the role of CFO. In the end, Oracle used the co-CEO system for a total of five years.
Oracle has now chosen to appoint new people to the board who could potentially become the new CEO of Oracle. When Catz and Ellison retire these potential CEO’s will show themselves, but according to Ellison (76 years old) they will not retire for the time being.
Marc Benioff is the founder, chairman and CEO of Salesforce. In August 2018, he appointed Keith Block as co-CEO, to distribute the work more efficiently. Benioff is very much the face of Salesforce, while Block acts more in the background. Not a bad choice in itself. Block initially earned his reputation at Oracle. He left Oracle after an argument with Mark Hurd. Salesforce brought him in as vice president and COO in 2013. Partly thanks to Block, Salesforce has experienced tremendous growth.
Nevertheless, February 2020 saw the unexpected announcement that Block was leaving Salesforce. In the statement issued by Salesforce, Block thanked everyone at Salesforce. The official report states Block is ready for the next chapter in his career. For the time being, he will remain with Salesforce as an advisor to Benioff. Something that could change quickly should Block find a new challenge. Nothing is certain as of now, but many large IT companies will be queuing up to enlist Block in their ranks. It is especially odd Block is leaving out of the blue. At Salesforce, they ended up working with co-CEOs for 18 months. Benioff is now the sole CEO again.
SAP, a company under immense pressure from activist shareholder Elliott Management, is the last one on our list. Elliott Management believes that SAP’s margins could be much higher if the company is more efficient and possibly reforms or sells some divisions. Although SAP never confirmed it, it is believed that Elliott Management caused many board members to leave SAP, although this was never confirmed by SAP. Apparently, former CEO Bill McDermott was one of these board members.
The official statement is that McDermott wanted to hand the company over to a new generation of CEOs in the heyday of SAP. Typically when Elliott Management steps in, there’s no such thing as a heyday, so they put up a great show. The new co-CEOs that SAP subsequently appointed were Jennifer Morgan and Christian Klein, at the time of their appointments 48 and 39 years old respectively. Two younger directors who realistically could not compare to McDermott and his predecessor Leo Apotheker in terms of accomplishments and experience.
These two young and relatively inexperienced directors had to lead SAP. Analysts argue that these two are easily influenced by Hassno Plattner, founder, chairman and major shareholder of SAP, which could be useful against Elliott Management. Plattner stated at the beginning of their co-CEO: “As they have already demonstrated, Jennifer and Christian complement each other perfectly and will be strong co-CEOs. A leadership model that has been successfully tested several times at SAP.”
Six months later, however, Jennifer Morgen leaves SAP as co-CEO, and her career has suffered a major blow. SAP says: “Today more than ever, the times we live in require companies to act quickly and decisively. This requires a clear leadership structure.” In a nutshell, SAP blames Morgan’s departure on the corona crisis. Not very credible considering she was only appointed six months ago. However, she is probably well compensated for her loss because she seems to agree with her departure in the official statement. SAP is now headed by a young director, Christian Klein. The co-CEO model that was once successful according to SAP has failed.
The conclusion is that co-CEO does not work
Clearly, working with co-CEOs is just not the best of ideas. Although the companies don’t go into it, having two leaders makes things more difficult. That does not mean it’s not feasible. It just highlights the importance that everyone has their own role. A good CEO, CFO, CTO, COO and CMO can work together to create a great company. The difference is the clear framework that is set up for these roles and their responsibilities. This is a proven model that works for many companies. As far as co-CEOs are concerned: it just does not work.