Amongst the most damaging forms of CEO value-destruction in the most recent cycle: ego-acquisitions, focus on revenue growth alone (while ignoring all four of the other sources of corporate value improvement*), naïve diversification into the profitless segments where the company has no particular distinctive strength.

New management will not be on board for a while. Because the replacements are generally competent and because the individuals do not want to jeopardize their portable pensions, they remain to fill out the full term of their original contracts, leaving a regent´s period ranging from several months to several quarters.

One would guess that this is a good period to implement inertia. No major cuts in factories or staff, no new strategic initiatives. The new CEO must have total freedom to decide which (and if any) of the managers and others still at the firm are part of the value-creating future, rather than a part of the value-destroying problem.

For while it is convenient to lay all the blame for past value destruction on the CEO who was shown the door, precedent suggests that value-destruction goes far further. The same people who dreamed up and actively promoted stillborn diversification into loser businesses are still around, of course trying to distance themselves from their former decisions. Top-heavy manufacturing management search out arcane statistics to ‘prove´ that the problem is with those lazy workers, not because management has twice as many layers in senior management than the value leaders.

And there´s the value-destroying accountant elevated beyond his ability to a (temporary) position of prominence. To the carpenter who only knows how to wield a hammer, everything looks like a nail. So it is for the self-limited accountant, who slashes costs without any understanding of which cuts decrease value and which increase value. One cut for sure that achieves the latter: firing her/himself.

The incoming CEO has the right, perhaps even the obligation, to try to sort out the management wheat from the chaff on his own, and some of the better ones have left firm instructions to leave the clearing out of the remaining value-destroyers to him, not to the value-destroyers themselves.

Without that clear guidance, precedent shows that the inmates are in control of the asylum. Old political scores are settled, managers who multiply their level of value destruction with each new utterance try to bury their past.

During this regency period, the hope against hope of the survivors will be that the incoming CEO will see the personnel cuts made, somehow believe that the chaff have been removed, and proclaim that those who remain are ‘the core team I will work with to increase value in the future´.

But the best of the incoming class will not fall for the trick, and will know that some of the ferrets who are the worst value destroyers have fired a bunch of secretaries and analysts to try to save their own skin. If the new CEO is any good, he/she instantly recognizes that these gamespersons caused far more value destruction than either the ex-chief executive.
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