Bob Iger joins the ranks of “Boomerang CEOs” with his return to Disney
With the reinstatement of Bob Iger, the board of directors of The Walt Disney Company is pursuing an established strategy to save a faltering company: bring back the last successful CEO.
On Sunday night, Disney’s board of directors announced that Iger would return as Disney’s CEO, replacing current CEO Bob Chapek, who replaced Iger himself in 2020.
Iger now joins a list of so-called boomerang CEOs that includes Apple’s Steve Jobs, Bloomberg’s Michael Bloomberg, Starbucks’ Howard Schultz, Twitter’s Jack Dorsey, Reddit’s Steve Huffman, and many other former executives moving back to the corner office were lured.
Iger served as Disney’s CEO from 2005 to 2020, a period during which the entertainment company’s market capitalization quintupled. Iger was responsible for Disney’s acquisition strategy—Pixar, Marvel Entertainment, Lucasfilm and 21st Century Fox snap up—which has helped transform the company into a content giant.
But the experience of other so-called “boomerang CEOs” shows that once-successful executives can stumble the second time, with one study finding that companies that bring CEOs back perform worse than those that hire someone new.
Boomerang CEOs
The results of the “Boomerang CEOs” are decidedly mixed.
One of the most successful was Apple founder Steve Jobs, who returned to run the tech company in 1997 after being ousted as CEO 12 years earlier. Job’s second term at the helm helped transform a nearly bankrupt Apple into one of the largest companies in the world—unless the biggest—Companies by market cap, on the back of devices like the iPod and iPhone.
Another successful Boomerang CEO was Starbucks’ Howard Schultz, who initially ran the coffee chain between 1986 and 2000. Schultz returned as CEO in 2008 during the global financial crisis when the company lost market share to cheaper vendors like Dunkin’ Donuts. Schultz’s second stint is credited with turning the tide of Starbucks, with the company’s stock price tripling between 2008 and 2017 when Schultz handed over the CEO position to Kevin Johnson.
But other returning CEOs have failed.
Chipotle founder Steve Ells returned to spearhead the grocery chain in 2016 after high profile food scandals. However, Ells struggled to restore public confidence in Chipotle, and a year later he resigned as CEO.
Jack Dorsey, who was ousted from the Twitter board in 2008, returned as CEO in 2015. However, Twitter was criticized during Dorsey’s second term for its content moderation policies, such as the company’s changing views on whether to allow then-President Donald Trump to use the platform. And during its return, Twitter has posted annual losses in all but two years. Dorsey stepped down as CEO last year and was a behind-the-scenes supporter of Elon Musk’s chaotic attempt to buy Twitter earlier this year.
Even Schultz, who returned as Starbucks CEO for a third time in March and is acting on an interim basis until Laxman Narasimhan takes over as CEO next April, has had his problems. Shareholders are less than enthusiastic about Schultz’s third mandate and are demanding that Starbucks conduct better succession planning. And Schultz’s aggressive handling of a union movement in the chain’s stores has created tensions with Starbucks workers and legal troubles.
board hopes
Boards of directors argue that established leaders can help set a company’s direction during tough times, and Disney’s board of directors is no exception. Disney’s decision to bring back Iger comes after a difficult 2022, in which the entertainment giant reported fourth-quarter revenue of less-than-expected $20.2 billion and a loss of $1.5 billion from streaming. Disney shares are down 41.4% for the year.
“As Disney embarks on an increasingly complex phase of industry transformation, Bob Iger is in a unique position to lead the company through this pivotal phase,” Disney CEO Susan Arnold said in a statement.
However, there are indications that “boomerang CEOs” could stunt a company’s growth. A study published in MIT Sloan Management Review in 2020 found that companies that rehired a former CEO had “significantly lower” stock performance than companies that hired someone new.
The study, conducted by researchers from the University of North Carolina at Chapel Hill and Marquette University, found that these negative impacts were amplified when the company brought back a former founder.
Our new weekly Impact Report newsletter will examine how ESG news and trends are shaping the roles and responsibilities of today’s leaders – and how best to address these challenges. Subscribe here.
