CVS Appoints Veteran Executive as CEO Amid Broader Trend of Leadership Changes

Last week, CVS Health appointed David Joyner, a seasoned company veteran, as its new CEO, joining a growing number of firms this year that have turned to experienced executives to address investor concerns in a turbulent economic landscape. Joyner replaces Karen Lynch, who led the company for three and a half years during which CVS’s stock declined by nearly 11%. Pressure from an activist investor influenced the leadership change, as CVS has revised its 2024 profit forecast downward three times, citing rising Medicare-related costs.

Earlier, Nike took similar steps by hiring Elliott Hill, a former senior executive, to replace John Donahoe as president and CEO, aiming to boost sales and compete more effectively in the marketplace. Additionally, Boeing tapped aerospace industry veteran Kelly Ortberg as its CEO to help the company navigate ongoing legal and regulatory challenges.

Brian Jacobsen, chief economist at Annex Wealth Management, explained that investors often feel reassured when an experienced leader takes charge during difficult times. He noted that while a new face may be appropriate when there are fresh opportunities or divisions, in times of economic uncertainty, investors tend to prefer someone who has previously weathered similar cycles.

This year has seen a record number of CEO departures in the United States. Between January and August, CEO exits increased by 15%, reaching 1,450, compared to the same period last year, according to a report by outplacement firm Challenger, Gray & Christmas. Economic uncertainty was cited as a key factor driving these leadership changes.

On Monday, Walt Disney followed this trend, naming James Gorman, a veteran from Morgan Stanley, as its new chair. Gorman had already been tasked with finding a successor for CEO Bob Iger, who retired in 2021 but returned the following year to help the company navigate a pandemic-related downturn.

Michael Ashley Schulman, chief investment officer at Running Point Capital, observed that the pandemic and resulting economic difficulties have led many companies to prioritize stability and experience over innovation. He noted that these companies often bring in seasoned leaders to execute immediate turnaround strategies rather than focusing on long-term transformation.

This approach has yielded mixed results. Apple famously benefited from the return of its founder, Steve Jobs, in 1997, who went on to revolutionize the company with the iPhone. Howard Schultz also returned to Starbucks three times, each time steering the coffee giant back on course when sales lagged. However, the strategy has not worked as well for other companies, such as Dell, Twitter, and consumer goods leader Procter & Gamble (P&G).

P&G brought back former CEO Alan Lafley in 2013 to revitalize its sales, but his second tenure proved less successful, and he was replaced by another company veteran after about two years. Research published in the MIT Sloan Management Review in 2020 highlighted that companies led by “boomerang CEOs”—executives returning for a second term—tend to underperform compared to their first tenure. The study found that the annual stock performance of companies led by these CEOs was, on average, 10% lower than those of their first-stint peers.

Xu Jiang, an associate professor at Duke University’s Fuqua School of Business, added that returning CEOs often display overconfidence. Their reliance on outdated strategies and difficulty in adapting to evolving business conditions can sometimes exacerbate problems rather than solve them.

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