BBC ran a story that when Larry Ellison stepped down, Oracle board announced two CEOs as successors. Surprisingly, Co-CEO model is not really rare event. You may have up to five men contacting you as CEO from a firm called Mobi Wireless Management! Well, I am not sure how big Mobi is, but it has grown in three digit percentages in the recent years. Samsung, admittedly, is big and has three CEOs. There are probably about 1,000 listed firms across the globe that have more than one CEO. Co-CEO models are quite common in M&A cases, family owned firms, co-founded management and in firms that are experiencing leadership transition. There is an increase in the number of firms that adopt a Co-CEO leadership model.
While I may have some selfish interest in propagating such a trend, it is worthwhile to delve a bit deeper. I have been brought up listening to an old Hindi idiom: there can be no two swords in one sheath. So how does it work? The question is really how it impacts shareholder value creation. The sub-question is when is it maximized?
Co-CEO of Willis North America Mario Vitale says that it will succeed if the the two or more CEOs complement each other in skills. While there are several other reasons, he states, with some excitement, another one: for the first time in his career he need not carry Blackberry to his vacation! But the Co-CEOs of RIM (Research in Motion, that owns Blackberry) also did not need to carry theirs: they got fired recently for bleeding market share to Apple and Samsung.
Success of Co-CEO structure requires some ego-less understanding among the CEOs. Possible? I guess yes. Not many with bloated egos will even make it to such top slots. Of course, even without egos in clash, decision making can be a bit paralyzed. That may be avoided if the board clearly sets the agendas, specifies the scope of operations and spells out clearly the responsibilities – exactly what Oracle board did.
Co-CEO models are successful also when CEOs have different and far-flung geographical responsibilities or product-market domains.Whatever be the responsibility or scope, a very good understanding is still crucial. But understanding can also mean compromise – a killer of innovation.
Professor Stephen Ferris of the University of Missouri states a few other benefits. Most firms with Co-CEO structure do better than single CEO firms. Compensation for Co-CEO model is actually lower than single CEO model. Market reacts positively to Co-CEO announcements.
So there is reasonable cause for good cheer for Oracle. I hope it does great..