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Why do CEOs switch jobs?

A handsome salary is always the deciding factor for any person to keep his job and also to change it and a CEO is not averse to it, reports Devraj Uchil.
Hindustan Times | By Devraj Uchil
UPDATED ON MAR 06, 2008 12:57 AM IST

A handsome salary is always the deciding factor for any person to keep his job and also to change it. At the same time, that something extra is what makes working a pleasure and a CEO is not averse to it. Here are a few reasons that force or lure a CEO into changing his or her workplace.

The challenge counts

“Perks at the CEO level are more or less comparable and not really a deciding factor for changing the job. But I am yet to meet a CEO who does not move for a greater challenge,” says Rachna Saksena, practice head – ITeS & HR research – Ma Foi Global Search Services Limited. ‘Challenging’, she adds, is how you define the word – the ‘risk element’ is directly proportionate with the returns. In addition to challenge, the company’s brand pull, its balance sheet, future plans and credentials of the executive board also count.

Work satisfaction is another important component for the CEO. He/she could get bored of his/her job profile and yearn for new challenges in about 4-5 years, on an average. When the job ceases to be challenging and interesting, the CEO will look around for something else.

Opting for variety

“One of the reasons why CEOs seeks job change is variety and enrichment in experience,” says James Agrawal, head, BTI Consultants India. There are many successful CEOs who have joined smaller and young /start-up organisations so that could build the company ground up and personally recruit their core leadership group.

There are examples of CEOs who have turned down lucrative global opportunities to work in a challenging and high growth environment in India and others who have joined sunrise sectors such as real estate and retail so that they can apply their past experience to manage new challenges. So variety often goes hand in hand with challenge.

“When you are a CEO of a company, your perks become secondary. It’s what you have contributed to the firm and the growth chart, that becomes more important,” says Datta Shiraz, head, marketing, India region, Cincom.

Perks are important

Though perks are not the only deciding factor for a CEO, they should not be neglected either. Perks are the ‘interest’ that the CEO gets from his job. “Super perks are among the major reasons for many CEOs to rethink about their job,” says Shiraz. A lot of firms do offer what would, at a glance, look outrageous as perks to their CEOs.

These perks may not even be direct payments to the CEO; they could well be benefits offered to his family – paid-for family holidays, club memberships, all medical expenses paid for self, family and dependent parents, two company maintained cars, scholarships for children’s study abroad, even fully furnished accommodation and company-maintained household staff, for example.

Family matters

“A family’s desire to stay at a particular location, quality of education, family support, language and cultural barriers, quality of life and health facilities are influencers in a CEO’s decision to switch jobs,” says Agrawal. While the idea may still have to catch up significantly in India, internationally a CEO, unable to shift location, may be accommodated with travel perks to compensate for work travel. A recently published report pointed out that the new president at Starwood Hotels & Resorts Worldwide would get $1.5 million for airfare during his first year on the job. This money is offered to him because it is difficult for him to shift to New York from his home in California for the job, as his son is yet to complete his high school in California.

In India, companies often put up senior officials in accommodation that takes care of all their needs and even pay for some agreed upon frequency of travel to locations where their families may have stayed back due to children’s education or some other reasonable constraints.

The buck should stop here

“Top executives often move for authority, responsibility, environment and money. If they find any of the factors missing, they switch jobs,” says Sanjay Teli, MD of ESP Consultants. “If a CEO has two oxygen cylinders next to him, one is for productivity and the other is for freedom.”

Control of the job plays a crucial role. If the position is for namesake, without any control, then it might not attract the ‘entrepreneurial’ CEO. “Along with the perks, the company should also offer control,” concludes Shiraz.

The exit deal

Increasingly, as CEO positions get more short-lived in the face of huge pressures to perform, the exit deal the potential CEO strikes with the appointing company can play a crucial role in his moving to the new job. Former Nike chief executive William Perez resigned last January after serving a mere one-year on the job. His severance package was a whopping $5.5 million, including a $2.8 million as two years’ base salary.

He also received a $1.75 million bonus for 2006, despite of not serving the whole year. Nike also purchased his Portland home for $3.18 million, the renovation of which had already cost it $579,649. His prepaid athletic club fee was $456,500, paid by Nike and non refundable even if he quit the club prematurely, which he did.

In India too, exit deals are gaining strength as CEOs switch jobs more quickly than before and companies also change CEOs with greater frequency, sometimes because their own change in plans require a different kind of head honcho.

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