Jack Dorsey announced on Nov. 29 that he was stepping down as CEO of Twitter (NYSE:TWTR). TWTR stock gained 11% on the news; Dorsey also runs Square (NYSE:SQ), and CEOs running two companies generally doesn’t sit well with investors.
Dorsey has a checkered past with Twitter. In 2008, the board sent him packing because his management style was less than ideal. However, he remained on the board and was reinstalled as chief executive in 2015.
“I want you all to know that this was my decision and I own it. It was a tough one for me, of course. I love this service and company…and all of you so much,” Dorsey wrote in an email to employees. “I’m really sad… yet really happy.”
I’ve always been a fan of the job Dorsey’s done at Square. However, I, too, felt he was carrying too much responsibility performing both jobs. Both companies will be better off with separate CEOs.
Here are 7 CEOs who ought to follow Jack Dorsey out the door:
- Jeff Sloan, Global Payments (NYSE:GPN)
- Gary Norcross, Fidelity National Information Services (NYSE:FIS)
- Bobby Kotick, Activision Blizzard (NASDAQ:ATVI)
- Tom Werner, Lamb Weston (NYSE:LW)
- Frank Del Rio, Norwegian Cruise Line Holdings (NYSE:NCLH)
- Hikmet Ersek, Western Union (NYSE:WU)
- Hervé Hoppenot, Incyte (NASDAQ:INCY)
While Dorsey stepped down because it was the right thing to do, many CEOs hang in there too long, way past their prime. And some were never any good in the top role.
CEOs Who Need to Go: Jeff Sloan, Global Payments (GPN)
Jeff Sloan has been the CEO of Global Payments since October 2013 (8 years, 2 months). In 2020, Sloan’s total compensation was $15.5 million. In addition, he made $29.2 million from option and stock awards that vested.
How has GPN stock done since Sloan’s been CEO?
It’s appreciated by 415% over this period. That’s the good news. The bad news is that over the past five years, GPN has had an annualized total return of 12.9%, 490 basis points less than the entire U.S. market.
You would think that a fintech company would have delivered better performance in recent years, but that’s clearly not the case. Over the same five years, Square’s annualized total return is 69.5%, a fivefold improvement over Sloan’s performance.
It isn’t the worst performance by an S&P 500 CEO. That said, it’s probably time for someone else to take the reins.
Gary Norcross, Fidelity National Information Services (FIS)
Gary Norcross has been CEO of this Florida-based payment processor since January 2015 (just shy of 7 years). And he’s held the dual roles of CEO and Chairman since 2018.
That’s generally considered bad governance. And Norcross has been with the company since 1988. At 55 years of age, it’s likely been his only employer as a working adult.
In 2020, Norcross’s total compensation was $17.9 million. In addition, he made $63.4 million from option and stock awards that vested. As a result, the CEO’s total compensation was 296x higher than the median employee’s salary in 2020.
How has FIS stock done since he’s been CEO?
It’s appreciated by 74% over this period. The overall index simultaneously appreciated by 128%, 73% better than FIS.
In November, Norcross defended his company, suggesting that despite the steep decline in its share price in 2021, he believes it is performing exceptionally well, but investors fail to understand this.
“While our team continues to execute at a very high level, our share price is not performing well,” Norcross stated during its November conference call, the Jacksonville Daily Record reported.
“Over the last few months, our management team engaged in open and constructive dialogue with the investment community about areas where we can improve the messaging and transparency of our business. We believe in the strength and value of our company.”
Shareholders definitely should not be impressed.
Bobby Kotick, Activision Blizzard (ATVI)
In December 2019, I discussed whether Activision Blizzard stock could get back to $80 in 2020. I concluded that it had a better chance of revisiting this level — it was trading around $55 at the time — sometime in 2021.
In fact, it managed to trade above $80 by August 2020, getting as high as $104.53 in February of this year before collapsing in July. Precisely two years later, it’s trading around the same price.
The culprit? CEO Bobby Kotick.
It seems the man doesn’t have a problem running his company like a frat house. Bro corporate culture is as toxic a business environment as it gets, and investors would be wise to avoid companies that turn a blind eye to sexual harassment.
“Since I’ve been employed at Blizzard I’ve been subjected to rude comments about my body, unwanted sexual advances, inappropriately touched, subjected to alcohol and abuse at team events and invited to have casual sex with my supervisors, surrounded by a frat boy culture that’s detrimental to women,” SiliconValley.com reported the comments of a female employee on Dec. 8.
I don’t care how good its games are, this is NOT a company I’m prepared to stick my neck out for.
Not surprisingly, ATVI has just two women on a 10-person board, Reveta Bowers and Dawn Ostroff.
If you’re reading this, ladies. Kotick needs to go.
Tom Werner, Lamb Weston (LW)
CEO Tom Werner has been with this producer of frozen frenchfries since November 2016 (5 years, 1 month). Before that, Werner was an executive for ConAgra (NYSE:CAG), heading up the Lamb Weston division before it was spun off on Nov. 9, 2016, with Werner leading the newly independent company.
In fiscal 2021, Werner’s total compensation was $6.4 million. He made another $14.9 million from option and stock awards that vested. That’s considerably less than the annual compensation for the three previous CEOs. The CEO’s total compensation was 115x higher than the median employee’s salary in 2020.
How has LW stock done since becoming a public company?
It closed its first day as a public company at $30.33. That means it’s appreciated by 88% over this period. The index over the same time appreciated by 117%, 33% better than LW. The good news is that CAG stock has gone sideways in the five years and one month Lamb Weston’s been a public company.
Looking at the company’s financials since becoming a public company, it doesn’t appear to have made much progress as a business.
In fiscal 2016 (May year-end), it had sales of $3.0 billion, operating income of $373.3 million, and free cash flow (FCF) of $230 million. In fiscal 2021, it had sales of $3.7 billion, operating income of $474.8 million, and FCF of $406 million.
This works out to 4.3% compound annual growth for its sales, 4.9% CAGR for operating income and 12.0% CAGR for FCF. However, the only reason it delivered double-digit FCF growth is that it cut capital expenditures in half for both fiscal 2020 and 2021. If the pandemic hadn’t hit, FCF would have appreciated by 4%, just like its other metrics.
That’s not good enough.
Frank Del Rio, Norwegian Cruise Line Holdings (NCLH)
The analysts seem to love Norwegian Cruise Line’s CEO. In mid-November, TradeWinds reported that Infinity Research analyst Assia Georgieva lauded the company’s refinancing moves.
First, it issued 46.9 million shares of its stock to holders of its 6% exchangeable senior notes. The company then used the proceeds to pay down $500 million in debt at rates between 10.25% and 12.25%. It also sold $1 billion in 1.125% exchangeable senior notes due in 2027. Finally, it used those proceeds to buy back $716 million of its 6% exchangeable senior notes mentioned previously.
“‘Even the individual would want to do that, refinance with a mortgage or a credit card where you get lower interest rates,’ [Georgieva] told TradeWinds.”
However, let’s get back to Del Rio.
With more than 28 years of experience in the cruise industry, including the last seven as CEO of NCLH, you would think that I would cut him some slack. After all, the cruise industry has been through hell and back during Covid-19.
However, when you consider that Del Rio made $36.4 million in 2020, and another $7.6 million from option and stock awards vested last year, you would hope for above-average returns. Unfortunately, that’s not the case.
NCLH has an annualized five-year total return of -13.1%. Over the same period, RCL had annualized total returns of -0.3%.
For my money, Royal Caribbean CEO Richard Fain is the best in the business. At 66, Del Rio needs to take an extended cruise off into the sunset.
Hikmet Ersek, Western Union (WU)
The longest-tenured CEO on my list, Hikmet Ersek, became chief executive of Western Union on Sep. 1, 2010. He had served in various capacities at the money transfer company since 1999.
How has WU stock done since he’s been CEO?
It’s appreciated by 11% over this period. The index simultaneously appreciated by 325%, 2,855% better than WU.
In 2020, Ersek had total compensation of $10.4 million. In addition, he made $7.5 million from option and stock awards that vested last year. As a result, he was paid 339x the median compensation of its employees.
All that for 11% over 11 years. Some savings accounts pay more.
You can argue that Western Union is a dying business, so the CEO’s been busy putting out fires rather than growing it, but the reality is that he was hired to make money for shareholders.
He hasn’t. His time ought to be up.
Hervé Hoppenot, Incyte (INCY)
Evaluating biotech companies isn’t nearly as straightforward as other businesses. Sometimes, you can have a great business and products in development, but the regulatory hurdles don’t go your way.
Biotech investors require immense patience. That said, the CEO’s job remains the same. They are paid to deliver positive shareholder returns.
Since Hervé Hoppenot joined the company as CEO in January 2014, INCY stock has appreciated 32%. Meanwhile, the S&P 500 appreciated by 156%. In addition, the Nasdaq Biotechnology Index appreciated by 101% over the same period.
INCY has underperformed. At the very least, the board should take away the executive’s Chairmanship.
In 2020, Hoppenot’s total compensation was $16.4 million. In addition, he made $17.4 million from option and stock awards that vested last year. He was paid 65x the median compensation of its employees. Incyte employees get paid well to find the next “it” drug.
Interestingly, if you invested in Novartis (NYSE:NVS), the company Hoppenot left to become Incyte’s CEO in 2010, you would have done even worse. It’s up just 14% since the end of 2013.
That’s not a reason for the board to keep him around, though.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.