In January, a headhunter from the search firm Spencer Stuart started calling restaurant-industry executives with a proposition: would you come to Cracker Barrel as the next chief executive?
The Second Act
Cracker Barrel’s decision to select a 69-year-old former restaurant executive to lead the chain highlights an emerging practice of boards calling in retired chief executives from the sidelines to help engineer high-profile turnarounds. The family-dining chain’s board and its current Gen X chief executive had agreed they would work together to look for her replacement after an uproar over branding changes caused the chain’s sales to plunge, according to people familiar with the search.
In recent years, Boeing, Verizon Communications and others have all chosen once-retired CEOs. An established executive is a known quantity, governance specialists say, even if research suggests the performance of second-act chief executives tends to be mixed. For the executives themselves, returning to the corner office often holds appeal — new business problems, plus the perks and power. “There is no such thing as a retired CEO in the U.S.,” said Matteo Tonello, head of data benchmarking and analytics at the Conference Board. “In this country, CEOs don’t really retire, they just become professional directors.” Some then leave board work and move back into the top job.
The Data Underneath It
The number that gives this story its spine comes from an analysis of the entire tenures of 855 S&P 500 CEOs over a 20-year period, including 106 chief executives with prior public-company CEO experience and 749 first-timers. Measured as the share of CEOs outperforming the market by year of tenure, the curve starts high — 58% in year one, 55% in year two — and does not get friendlier with time.
The split by experience is the counterintuitive part, and it is the reason to be careful with the bring-back-the-legend instinct: across the sample, 56% of first-time CEOs outperformed against 42% of experienced ones. A resume is not a strategy, and a familiar name is not a moat.
No trade. The average holding period of our book is longer than the average chief executive’s honeymoon, which is the practical case for buying governance rather than personalities. A management change is a reason to re-read a thesis; it is almost never a reason to write a new one.
Action: none. Where we own a business through an index sleeve, we own its succession risk at market weight by design — that is the point of the sleeve. Where we own a name directly, the question we ask on a chief-executive change is whether the cash flows depend on the person or on the position.
- Index · Broad U.S. equity sleeves · succession risk owned at market weight