The CEO’s Second Act - by Marc Feigen and Ron Williams
“I don’t quite know what to do next,” said Simon, a media CEO. Simon had been a chief executive for 15 years, and CFO before he was 30. He had turned around private and public companies, quadrupled profits and quintupled revenue. But, with his company recently sold, Simon was considering retirement. Like many CEOs, he had had no time to plan his retirement – all his focus had been on running the company.
Each year, over one hundred CEOs retire from the S&P 1000. Even in the most well-oiled CEO succession processes, one piece is almost always missing: preparing the current CEO for the next phase in his or her career. “I was so focused on the CEO job, I didn’t spend time figuring out what I would do next,” says Scott Davis, former CEO of UPS. Bill Weldon, former CEO of J&J, echoes what most CEOs tell us, “I didn’t do a lot of thinking about post-employment while I was still the CEO. As a result I went off the off ramp at 110 miles an hour and quickly hit zero. Retirement was a black hole.”
On average, CEOs step down at age 62, relatively young by today’s standards. Few have to work for living. But almost all want to work, and they do. We studied the post-CEO careers of 50 Chief Executives in the Fortune 500, and interviewed a dozen of them. Not one retired to the golf course. The annual exodus of CEO talent does not go fallow under the Florida sun.
While only a few take on another CEO job, almost all former CEOs are contributing to the U.S. economy and to societal wellbeing. More than a quarter of past Fortune 500 CEOs become active in private equity. Over half assume leadership positions at nonprofit organizations, and almost all give back in nonprofit activity. Two thirds serve on public boards. Over half are involved in academia or teach, and some even write books.
CEOs have a second act:
- Pat Woertz, former CEO of ADM, sits on the boards of P&G, and 3M. Together these boards meet over 25 days a year, and she spends two days preparing for each board meeting. In addition, Pat is on the Northwestern Hospital Board and advises a startup accelerator in Chicago. She is also mentoring women, “saying yes to more people than I was able to before.”
- Jeff Kindler, former CEO of Pfizer, notes, “The beauty is you can try things out you haven’t been able to before,” and he asks, “What are the things in your professional life you never got around to?” Jeff is mentoring senior executives, advising start-ups, being an entrepreneur himself, serving on public and nonprofit boards, and lecturing at Harvard, Yale, and Columbia. “The best part,” he says, is the “fabulous opportunity to connect with younger people in earlier stages of their career.”
- Bill Weldon, former CEO of Johnson and Johnson, notes he has “the best part-time job in the world – down to 40-50 hours per week sitting on public and private boards – including the board of JP Morgan, helping educate under-privileged students, lecturing at Harvard Business School, mentoring young CEOs, and spending time with family.
- A week before retiring after running American Express for 17 years, Chairman and CEO Ken Chenault announced he was joining the Airbnb board and the FaceBook board. A few days later he announced that he would become Chairman and Managing Director of General Catalyst, a highly successful venture capital firm. Ken told us, “the concept of the next chapter is what I believe in strongly, not calling it a retirement.”
- Indeed, very few former CEOs describe their new life as “retirement.” Giving back to society is the number one theme we heard. We were struck by this comment from Dick Parsons, former chairman of Citigroup and former Chairman and CEO of Time Warner:
“As citizens, we owe back to our society. We have to support the platform. In America, so much of what makes things work is volunteer activity rather than government-directed or commercial activity. Being an overall good citizen is being engaged in civil society and helping manage the allocation of society’s bounty.”
Today, Dick chairs the Rockefeller Foundation, which gives over $250 million away each year. In the financial crisis, Dick became Chairman of Citigroup at the most perilous moment in the bank’s history. Dick restructured Citigroup’s board and replaced the CEO, only departing after the company found stable footing. When the Los Angeles Clippers leader was censured and removed for racist remarks, Dick stepped in at the request of the NBA to lead the team, weathering the crisis. To help Harlem, Dick founded two award-winning restaurants to help revitalize the community with jazz music and African-inspired cuisine.
After retirement, CEOs must grapple with a loss of power, prestige, and immense responsibility. As Ron Sugar, former CEO of Northrop Grumman told us, “The first few days, it does feel like maybe you’ve fallen down the elevator shaft…. My wife gave me The Joy of Not Working. I read it and got so depressed. I did not want that!”
This can be especially hard on CEOs who are women. As Anne Mulcahy, former CEO of Xerox warns, “there’s a special place in hell for retired women CEOs. By the time you are at retirement age, your kids have left the home too. It’s double retirement.”
Anne further cautions that, “the things that work for you as CEO work against you as a retiree, such as being in command and your high energy level.” It took Anne a while to find her footing – she reports “calendar filling.” But not for long, as lead Director of J&J, Chairman of Save The Children, and a guest lecturer at Harvard, she found work that gave her purpose and passion. “For me, it wasn’t about making money or visibility, but about impact and usefulness.” Indeed, as head of Save the Children she visited Iraq, Syria, and Afghanistan to fact-find and develop strategies to help refugee children in these war-torn countries. (Hardly the image of the retired CEO on the golf course.)
Any immediate sense of loss is short-lived. Almost every CEO we interviewed reported great satisfaction in their work lives after being CEO. While deeply proud of their accomplishments in the job, they were relieved at not “being slave to the corporate calendar.” Former Verizon CEO Ivan Seidenberg told us, “I do no retail,” meaning he takes on no role which requires visiting customers, calling on shareholders, or selling anything. He can cherry pick what he likes to do, and does. Ron Sugar, after falling down the proverbial elevator shaft, is now on the Boards of Apple, the most valuable company in the world, biotechnology giant Amgen, and Lead Director of Chevron. Ron also works in private equity and venture capital, mentors younger CEOs, and is deeply fulfilled.
CEOs find themselves highly valued after retirement. “It was almost a surprise to me how much you really have to contribute,” says Dick Parsons. “But you soon realize: ‘I’ve seen this movie before, I can help here.’”
CEOs who step down find a surfeit of opportunity. “It was surprising how quickly opportunity came my way,” said Doug Hodge, former CEO of PIMCO. “Within weeks of retiring I had opportunities to join a major board, and exciting invitations from venture capitalists to play an active role in FinTech companies. I have rebooted myself.”
So how do CEOs stand up and find fulfillment in their second phase? Most CEOs we spoke to, like Simon, had no time to plan their retirement while running their companies. In our research, we identified ten pieces of advice to guide retired CEOs as they plan for “Act II”:
1. Plan your off-ramp. Ken Chenault advises CEOs to plan their off ramp while they are still in the CEO job by “identifying the categories of things that are important to them” but not necessarily the “specific opportunities.” CEOs who don’t plan risk “falling into the abyss” warns Ken. “They are not sure what the next chapter holds for them. … Take the time to plan what is important to you. Don’t ignore it. It is very important to be thoughtful.” Ken recommends thinking through one’s business, philanthropic, and family priorities. For example, Ken knew that in his business work he wanted to focus on digital and technology. “In this way,” Ken says, “when opportunities came my way I was ready, because I had thought about them.” At the beginning of his off-ramp, Ken did not know exactly what he would do, but he knew what was important to him, which allowed him to move quickly and decisively.
2. Take your time. The most common CEO error is to rush to fill the void, and accept invitations too quickly. As Ron Sugar says, “For the first six months, say ‘no’ to everything that is offered to you. Usually the first offers you get are not the things you should do.” CEOs told us repeatedly that the only thing they got really wrong was to move too fast –which then required unwinding obligations. For example, one CEO accepted a seat only to wiggle out of it in favor of a better, larger board opportunity. It would have been wiser to take it slow. Say ‘no’ often, ‘yes’ slowly.
Ivan Seidenberg knew this would take discipline. “When I retired I had nothing to do for months, no industry conferences, no media interviews and nothing related to my former company and industry. I wanted a clean break so that I could develop a plan for the next twenty years. I kept restricting activity. I didn’t break my rule of not accepting anything – until I was ready. I’m busy now and am attached to things I am doing,” which include significant philanthropy, serving on the BlackRock Board, investing in companies where he feels he has advice to add, and advising Perella Weinberg.
Although it seemed to the outside that Ken Chenault moved quickly, he turned down many corporate and private equity invitations before deciding to become a partner and Chairman of venture capital firm General Catalyst and assembling the – developing his plans before stepping down.
3. Opportunity Farm. Survey the options. Meet with leaders in all aspects of life you find interesting: whether it be private equity, philanthropy, or teaching. Meet with retired CEOs and learn their path to what they are doing now. Accept every invitation to meet but decline all commitments until you are good and ready.
4. Prepare to Deal With Yourself. Retirement can put even the most self-assured Chief Executives in the unfamiliar position of self-questioning and self-doubt. “It prepares you for dealing with yourself,” says one CEO. “You need to know who you are when you’re done being CEO,” says Anne Mulcahy. She adds: “That means reflecting on aspects of your personality and temperament and sometimes modifying some CEO traits.” Dick Parsons told his wife that he could write and teach, and she said, “And what will you do next week?” Dick had a chair at Howard University, but didn’t love it. It took him a while to find his passion. He asked himself, what did he want to do as a kid? He always wanted to run a jazz club, so he opened one. He also bought a vineyard, reasoning, “In the worst case, I could drink the results!” And he loves it: “there I am in the soil, it’s a product, there is dirt under your fingernails, it’s tangible.” This is deeply personal. Jack Rowe, a medical doctor, former professor and successful former CEO of Aetna, returned to academia to teach in the Schools of Business and Public Health at Columbia and lead a productive research program. He also sails and spends time with family. “What are the things you will enjoy?” asks Bill Weldon. This is a constant refrain. Pat Woertz loves her new life, and adds, “I am sleeping much better!” Ken Chenault counsels, “in a transition, it is vital to be self-aware.
5. Partner with your Partner. If a CEO has a significant other, it is critical to “align expectations” -- to apply a business term to a family environment. If your spouse has been waiting patiently and now wants to travel, and you want to go back to work, now is the time to develop a shared plan endorsed by your family, or at least understood by them. Every CEO we interviewed planned to spend more time with family, and did. Ken Chenault and his wife scheduled out together time to spend time on activities important to them.
6. “Take Another Gig” or “Go Plural?” Determine whether you want a second full-time CEO role, or whether, as the British usefully describe it – you want to go “plural” and build a portfolio of activities. If you want a second gig, be prepared to wait. When Ed Breen stepped down as CEO of Tyco, he wanted to run another big company. Three years later he was Chairman and CEO of DuPont – where he delivered a total shareholder return of over 25% between his appointment in October 2015 and DuPont’s merger with Dow Chemical in August 2017. (While waiting, Ed hardly sat on his hands: he chaired the Tyco Board, joined the DuPont board, opened a hotel, and built an energy start-up with his son.)
7. Diversify your finances. Your portfolio will be concentrated in your previous company’s stock. Wealth is created through concentration. Wealth is preserved through diversification. It’s time to diversify. Ron Sugar sold a good portion of his Northrop Grumman stock. Even though its prospects were strong, he wanted to “minimize his maximum regret. You don’t get a Mulligan with your life savings.”
8. Assume the Role of Mentor. There is one feeling of loss that CEOs find hard to overcome. It’s not the plane, nor the power. It’s the people. When asked what he missed from the job, Scott Davis said what many echoed, “The people you work with. I developed a lot of comrades over the years, and you don’t see them as much anymore.” Ex-CEOs who embrace mentorship opportunities find a great way to fill this gap, and find fulfillment in passing down their wisdom to an eager student. As former Johnson & Johnson CEO Bill Weldon told us, “We have experienced things other people have not. We can draw on those experiences to help other people.” Ron Sugar adds, “You must embrace the change from being in charge of everything to a new role as teacher and mentor. But find people who appreciate it, because you do not want to end up spending time on people who are not grateful.”
9. Plan your allocation of time. Write down the hours/day and days/year you want to work. Leave room, as Ron Sugar reminds us, “for surge capacity” as a portfolio of interesting activities can sometimes lead to unpredicted time requirements. Divide your time between for-profit and not-for-profit. Determine where you want to earn money and where you want to give money. Finally, write down how much time you want to spend with family or personal hobbies.
10. Pay attention to the Practicalities. Many CEOs take an office, either in shared space, company-owned space, or a home office. If you stay at home, separate the office. As Ron Sugar says, “My wife has her space. I have mine.” Quickly make sure you have the right independent advisors. If you can, negotiate IT and travel support – these are hard to replace. Ken Chenault advises CEOs to create the office environment – to have the “amenities they are used to.”
11. Give back. Bill Weldon says it best: “The philanthropic side of retirement provides psychic reward and payback far better than any money we receive in our for-profit work.” Rebalance to philanthropy. This is the time to build a foundation, and begin to distribute your wealth. All of the CEOs we interviewed give back. For example, Ken Chenault chairs the Board of the Museum of African American History at the Smithsonian and is a member of the Harvard Corporation; Ron Sugar is trustee of the University of Southern California, director of the Los Angeles Philharmonic Association, member of the UCLA Anderson School of Management’s board of visitors, director of the World Affairs Council of Los Angeles, and national trustee of the Boys and Girls Clubs of America; and Scott Davis serves as a trustee of the Annie E. Casey Foundation, and is a member of The Carter Center Board of Councilors.
With this guidance, CEOs can take one of the hardest steps of their career: exiting. Boards can help by supporting the transition, offering planning guidance and practical support. Well-performing CEOs who have given their all for the Company’s success should be provided critical services, including travel support, IT, and an administrative assistant. Aetna, Verizon, and Northrop Grumman even provided an office -- and we think this is best practice.
In return, it is easier for CEOs to leave.
And, as Jeff Kindler told us, “The opportunities are immense. If I had the opportunity to understand what the retirement world would look like before retiring, I would have been able to get my plans together in a matter of months rather than years.” As Dick Parsons says, “when retiring CEOs think about what’s next, they should know they bring a knowledge and experience base that can help almost any kind of collective enterprise.”
Helping a CEO prepare and prosper in ACT II can be considered part of a Corporation’s social responsibility. In the US, the work ethic of almost all retired CEOs leads them to give back to society significantly. The 13 former CEOs we interviewed for this article collectively serve on at least 25 philanthropic boards. Their contribution to philanthropies, to small companies that drive economic growth, to large companies that employ thousands of people, and to knowledge and teaching is meaningful. CEOs who embrace the second act of their career welcome the new opportunities this new phase brings. And our society is better for it.
Marc Feigen is the CEO of Feigen Advisors.