Jul 6, 2017

Companies keep dumping their CEOs

Reed Saxon / AP

It's tough to feel sorry for the modern CEO given skyrocketing executive compensation, but corporate chiefs are facing one headache like the rest of us: dwindling job security. The Wall Street Journal reports that 13 firms worth more than $40 billion have dumped their CEO this year, compared with less than half that number at this point in 2016.

The trend has been brought on by increasingly activist investors who believe that CEOs are not doing enough to boost profits in the short term. Activists have launched nine campaigns targeting top management at U.S. companies in 2017, the fastest pace in three years.

Why it matters: Since the 1980s, activist investors have zealously and successfully promoted maximizing shareholder value—the idea that a company's only goal should be to increase its market value. This comes at the expense of competing visions, like the stakeholder theory, which argues that companies should balance the interests of workers, customers, and ownership when making decisions.

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