Not that long ago, I came face to face with a rare beast in corporate life: the co-chief executive.
He was Dino Otranto, chief executive for metals and operations at Australia’s Fortescue iron ore mining group. He is not to be confused with Agustin Pichot, who was appointed Fortescue’s chief executive for growth and energy in July last year.
I was supposed to be talking to Otranto about the company’s plan to eliminate the use of fossil fuels across its Australian land-based iron ore operations by 2030. But I was curious to hear how the co-CEO structure worked, not least because so many well-known organisations have recently adopted it.
In the space of nine days in September tech giant Oracle, media behemoth Comcast and music streamer Spotify all announced two CEOs. Even Jeff Bezos joined the club, becoming co-chief executive of a new AI start-up he is backing code-named Project Prometheus.
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Other big names have been there before. Netflix got two CEOs in 2020, a year before Waymo, the self-driving car outfit, and long after they had been tried everywhere from Deutsche Bank to Salesforce and Marks and Spencer.
But good luck spotting one in the wild. Fewer than 100 of the 2,200 companies in the S&P 1200 and Russell 1000 indices were run by co-CEOs in the 25 years between 1996 and 2020. Since then, the share of co-chief executives in the 3,000 largest US-listed companies has hovered at about 1 per cent, the Equilar data firm says.
This makes sense, considering the conventional corporate wisdom that leadership is best done alone, and co-leaders risk creating inconsistency, instability and confusion about who is in charge.
This has always been my view. But at a time when chief executive turnover is rising to new records and AI and fractured politics add a fresh layer of complexity to roles that were already fraught, is the co-CEO worth reconsidering?
Otranto said the lines of responsibility were clear at Fortescue. He is responsible for operating existing projects and any new ones, while Pichot manages global growth opportunities, sales and bringing new business into the company.
“What I love about it is you can’t have an ego and the ego of a CEO is a really dangerous thing to have in the culture of any organisation,” he said. “Because our growth ambitions are so vast, it works for us.”
Fortescue also happens to have a very active executive chair, its billionaire founder Andrew Forrest. Spotify’s founder Daniel Ek has taken on the same role now that the streamer has two chief executives. Larry Ellison, Oracle’s founder, did the same when the company first appointed two chief executives in 2014.
Does this mean these companies have co-CEOs in name only? Not necessarily. But some research does suggest leadership works best when carried out solo. Companies started by lone founders last longer than those started by teams, and generate more revenue than those started by pairs, a US study of crowdfunded outfits showed in 2018.
More recent analysis of 87 large US public companies with co-CEOs showed something else: annual shareholder returns nearly 40 per cent higher than those of thousands of firms run by solo chief executives.
It is hard to draw solid conclusions from fewer than 100 companies, as the authors concede.
Still, their findings underline many reasons why co-CEOs might suit today’s tumultuous times.
If expertise is complementary, one person can deal with, say, the outside world or strategic transformations, while the other focuses on internal operations and more conventional business divisions.
Both can bounce ideas off each other. If one leaves, the other can maintain continuity. Crucially, each can spend less of their life on planes in an exhausting round of work trips.
That alone is invaluable, according to Jim Balsillie, a former co-CEO at the Canadian company behind the once-mighty BlackBerry device. “I don’t know how we could have done it without the two of us,” he told the Freakonomics podcast last year, adding there were “just too many times [when] we had to be in two places at the same time”.
The co-chief model failed to save the BlackBerry from the iPhone, but other innovators with one CEO have suffered the same fate. Ultimately, two heads won’t always be better than one. But at a time of gathering disruption, they might suit a lot of companies more than we imagine. – Copyright The Financial Times
