News Corp. (NYSE:NWS) and Apple Inc. (NASDAQ:AAPL) are two companies that seem to think their CEOs will live forever.
Media mogul Rupert Murdoch looked tired and confused at times when he was grilled by members of the British Parliament about the News of the World phone hacking scandal that has engulfed his News Corp media empire. Bloomberg News reported that the parent company of Fox News Channel and 20th Century Fox was considering elevating Chase Carey, a trusted Murdoch lieutenant well-liked by Wall Street, to be CEO. News Corp. denounced the anonymously sourced story, and Murdoch curtly told one of his interrogators he had no plans to resign amid the scandal.
This week also brought a strange report from the Wall Street Journal saying some Apple board members have “discussed succession with executive recruiters and at least one head of a high-profile technology company.” The story went on to ludicrously claim the talks “weren’t explicitly aimed at recruiting a new chief executive and were more of an informal exploration of the company’s options.” What would those be, precisely? Whether to continue to allow the company to be led by a CEO – a genius visionary for sure – who has needed to take medical leave twice in the past five years? Jobs called the story “hogwash.”
Boards of directors are under increasing pressure from both shareholders and the SEC to develop a coherent strategy to replace a corporate leader. They can’t afford to wait to act.
“The days of boards waiting until several months before a transition and then accepting or rejecting the recommendation of the outgoing executive regarding internal candidates are largely gone,” according to executive search firm Spencer Stuart. “In well-governed companies today, boards fully understand that effective succession planning is an ongoing process that requires consistent, dedicated work on their part.”
Investors in News Corp. and Apple have to think about what will happen when their CEO is called to the Great Boardroom in the Sky. For News Corp. shareholders, the question is especially troubling. Lachlan Murdoch, Rupert’s eldest son, was at one point seen as the heir apparent to the Murdoch media empire. In 2005, he resigned his post as vice chairman, paving the way for the ascent of his younger brother, James, who was at his father’s side during this week’s hearing before Parliament. However, Rupert Murdoch has not named James his successor. More family feuds are likely to spring up once Rupert is gone.
At Apple, Jobs’ duties have been ably handled by COO Timothy Cook. The iPad maker has been very cagey about its CEO’s health, leading to a torrent of speculation about whether Jobs is about to be downloaded into immortality. It’s easy to understand why. He first informed his staff that he had pancreatic cancer in 2004. In 2009, he got a liver transplant and subsequently returned to work. Jobs took his second medical leave in January 2011.
Both News Corp.’s and Apple’s boards have been far too timid about succession planning. Shareholders have the right to know the company will be run smoothly if the CEO leaves unexpectedly or meets an untimely end.
Jonathan Berr does not own any shares of the securities listed.