Good morning. When a chief executive succession race narrows to just a few contenders, losing doesn’t always mean losing out. I’ve noticed lately that some high-profile CEO contests have resulted in hefty compensation packages for the executives who came in second.
When Disney earlier this month selected Josh D’Amaro to succeed Bob Iger as CEO, the entertainment giant gave D’Amaro’s reported rival for the job, Dana Walden, a one-time $5.26 million stock grant, plus a recurring annual target compensation of about $27 million. And when Morgan Stanley named Ted Pick as its new CEO in 2023, it paid Pick as well as Andy Saperstein and Dan Simkowitz, reportedly dual runners-up, special bonuses valued at $20 million each.
The big bucks reflect the big stakes of retaining top talent. A leader who has ascended to the level of CEO contender is likely a high performer with broad institutional knowledge and deep relationships, both inside and outside the firm. Such a star walking out the door can scramble organizational operations, ruin team morale, and dent a company’s bottom line. Top executive turnover typically costs many multiples of the person’s annual salary.
Paying for executives’ loyalty works—to an extent. A recent report from consultancy FW Cook found that the grants have “a strong, but limited, retentive effect—typically lasting approximately two to three years.” That time frame likely reflects the awards’ vesting schedules, says Marco Pizzitola, a consultant at FW Cook and coauthor of its new report.
FW Cook’s report examined 100 large‑cap U.S. companies and identified 47 that swapped out their CEOs between 2016 and 2020. At roughly a third of those companies, boards rolled out succession-related retention grants to 39 named executive officers who did not become CEO.
Companies were more than twice as likely to hand out the grants if they hired external CEOs, suggesting “there’s greater concern” about an executive exodus with an outsider chief executive than with an internal promotion, Pizzitola says.
You can read more about this trend—and the second part of the consolation package that Disney awarded Walden—here.
Contact CEO Daily via Diane Brady at diane.brady@fortune.com
Top leadership news
Paramount wins Warner Bros. war
Warner Bros. Discovery’s board has officially deemed Paramount Skydance’s all-cash offer of roughly $111 billion or $31 per share a « superior proposal » over its existing deal with Netflix. Netflix declined to raise its bid, calling the deal « no longer financially attractive, » which clears the path for Paramount CEO David Ellison to assemble a media empire that aims to rival Disney.
Amodei’s focus on culture
Anthropic CEO Dario Amodei says his most important job is maintaining his AI company’s culture, which takes up nearly 40% of his time. “I think we’ve done an extraordinarily good job…making everyone feel the mission,” he said. His comments came even as Anthropic has stepped back from prior AI safety pledges.
A surprise perk of remote work
As CEOs push return-to-office mandates, a San Francisco Fed study of 25,000 French workers delivers a counterintuitive finding: remote and hybrid employees earn 12% more per hour than fully in-office peers. Even after controlling for demographics, a 6% wage premium persists—suggesting flexibility has become a perk reserved for top talent.
The markets
S&P 500 futures are down 0.31% this morning. The last session closed down 0.54%. The STOXX Europe 600 was up 0.30% in early trading. The U.K.’s FTSE 100 was up 0.41% in early trading. Japan’s Nikkei 225 was up 0.16%. China’s CSI 300 was down 0.34%. Hong Kong’s Hang Seng was up 0.95%. South Korea’s KOSPI was down 1.0%. India’s NIFTY 50 was down 1.25%. Bitcoin was down to $67K.
Around the watercooler
Citadel Securities demolishes viral AI doomsday essay, arguing the real ‘Global Intelligence Crisis’ is ignorance of macro fundamentals by Nick Lichtenberg
Bitcoin fans latch on to ‘ridiculous’ Jane Street conspiracy to explain price slump by Jeff John Roberts
After months of quiet, Perplexity’s CEO steps into the OpenClaw moment by Sharon Goldman
CEO Daily is compiled and edited by Joey Abrams, Claire Zillman and Lee Clifford.
In recent high-profile CEO succession races, a notable trend has emerged: executives who finish as close contenders for the top job are receiving substantial compensation packages, even if they don’t secure the position. This phenomenon underscores the competitive landscape for retaining top talent in corporations where leadership transitions can significantly impact organizational stability.
For instance, when Disney appointed Josh D’Amaro as CEO, Dana Walden, who was also in contention for the role, received a remarkable one-time stock grant of $5.26 million and an annual target compensation of approximately $27 million. Similarly, when Morgan Stanley announced Ted Pick as its new CEO in 2023, it awarded substantial bonuses of $20 million each to his rivals, Andy Saperstein and Dan Simkowitz. Such generous packages highlight the importance companies place on keeping key executives who possess extensive organizational knowledge and vital relationships that contribute to the firm’s success.
This escalating trend in executive compensation reflects the high stakes involved in leadership transitions. The departure of a top contender can lead to operational disruptions, eroded morale among employees, and significant financial repercussions for the company. Research indicates that the costs associated with losing an executive often exceed multiple times their annual salary, prompting companies to implement retention strategies for high-performing leaders.
A recent report by consultancy FW Cook explored this issue, analyzing 100 large-cap U.S. companies that experienced CEO changes between 2016 and 2020. The report found that approximately one-third of these companies provided succession-related retention grants to executives who did not ascend to the CEO position. Notably, companies were more inclined to offer these grants when recruiting external candidates, suggesting heightened concerns about potential executive turnover with an outsider at the helm compared to internal promotions.
FW Cook’s findings indicate that the retention grants have a « strong, but limited, retentive effect, » typically lasting about two to three years. This timeframe corresponds with the vesting schedules of the equity awards, as noted by Marco Pizzitola, a consultant at FW Cook. As companies navigate the complexities of leadership changes, the strategy of incentivizing executives who narrowly miss out on the CEO role appears to be a pragmatic approach to retaining talent and ensuring continuity within the organization.
In other leadership news, Paramount has emerged victorious in its bid for Warner Bros. Discovery, with its all-cash offer of around $111 billion deemed a « superior proposal » over Netflix’s competing deal. This development positions Paramount CEO David Ellison to establish a formidable media empire aimed at rivaling Disney.
Meanwhile, Anthropic CEO Dario Amodei emphasized the significance of maintaining company culture, dedicating nearly 40% of his time to this effort. His comments come amid a backdrop of the company scaling back on previous AI safety commitments, highlighting the delicate balance between cultural integrity and industry pressures.
Additionally, a recent study from the San Francisco Fed revealed an interesting trend concerning remote work: employees who work remotely or in a hybrid model earn approximately 12% more per hour than their fully in-office counterparts. Even after accounting for demographic factors, a wage premium of 6% persists, suggesting that flexibility in work arrangements has become a valuable perk reserved for top-tier talent.
In the markets, S&P 500 futures were down by 0.31% as of the latest session, which closed down 0.54%. The STOXX Europe 600 showed a slight uptick of 0.30% in early trading, while the U.K.’s FTSE 100 rose by 0.41%. In Asia, Japan’s Nikkei 225 gained 0.16%, while China’s CSI 300 fell by 0.34%. Conversely, Hong Kong’s Hang Seng index appreciated by 0.95%, but South Korea’s KOSPI and India’s NIFTY 50 experienced declines of 1.0% and 1.25%, respectively. Bitcoin’s value also saw a decrease, now trading around $67,000.
In other news, Citadel Securities critiqued a viral essay on AI, arguing that the real challenge lies in a lack of understanding of macroeconomic fundamentals. Meanwhile, Bitcoin enthusiasts have been speculating about a conspiracy involving Jane Street to explain recent price drops. In a different sector, Rolex has launched a trade school for watchmakers in Texas, attracting considerable competition among students, with graduates potentially landing jobs that pay around $95,000. After a period of silence, Perplexity’s CEO has re-emerged, hinting at significant developments forthcoming.
This overview encapsulates the evolving dynamics of executive compensation and leadership transitions, as well as other notable developments in the corporate landscape. As companies continue to navigate these challenges, the emphasis on retaining top talent and adapting to industry shifts remains crucial.
