When a CEO Leave of Absence Makes (Some) Sense

The story is familiar to everyone now. A valuable venture-backed ride sharing startup that is trying to upend the taxi industry, faces its own upending problems, with both outside and internal probes and fundamental questions about its business model and culture. A host of senior leaders have left the firm or been asked to leave.

But instead of resigning, Uber Chief Executive Travis Kalanick asked for a leave of absence, and the board granted him one today. In the past, many companies facing leadership crises have replaced their CEO outright. However, leadership experts say there are number of unusual circumstances that make a leave of absence a more palatable idea.

Leave of absences are rare for CEOs and usually stem from a medical or family issue. It’s why it was so noteworthy when Steve Jobs stepped away from Apple three times over several years to battle personal health issues. “Boards, particularly those of publicly-traded companies, tend to dislike leaves because they create too much uncertainly and give the appearance of indecision,” says Debra Nunes, senior client partner at Korn Ferry Hay Group.

But situations can vary. As in the case of Uber, the CEO may be a founder of the company and own a majority of the stock. Plus, in the case of Kalanick, the leader is dealing with a terrible personal loss (his mother was killed and his father injured in a boating accident in late May). Boards that don’t take into account personal tragedies or other unique difficulties can look bad firing leaders, no matter what the company’s troubles.

At a minimum, a leave of absence gives board directors several options for remedying a company’s issues while also performing their fiduciary duty, says Signe Spencer, client research partner at Korn Ferry. It gives directors breathing room to develop a strategic plan out of the public’s sight. That plan can involve restocking CEO’s executive team and adopting recommendations to change its corporate culture. It also provides directors time to decide whether a founding CEO has a future with the firm he started.

Authors

  • Debra A. Nunes

    Senior Client Partner

    Bio >
  • Signe Spencer

    Senior Consultant