Why Have the MSO CEOs Left?
As of today, 4 of the top 10 US cannabis companies have exited their CEOs this year.
Do these changes herald a cannabis industry trend or is something else afoot? Like everything in cannabis, its complicated.
Context is key
CEO exits are a natural feature of US corporate life and something that should not automatically be seen in a negative light. They leave (or more frequently, are asked to leave) for a variety of legitimate reasons including vision misalignments with their Boards, unethical behaviour, or simply poor performance.
Shareholders have become an impatient lot. The shelf life of American CEOs is getting shorter. According to Harvard Law School, the median tenure among the S&P 500 companies has decreased 20% from 6 years in 2013 to 4.8 years in 2022. I don’t have similar data for the cannabis sector, but turnover is not unheard of.
Some CEOs just get fed up. Running a cannabis business is very hard. Most MSOs are built like start-ups, replete with talent gaps and immature practices & cultures.
In most cases, the role is not all it’s cracked up to be. Cannabis CEOs get paid less (on average) and are hassled more than their non-weed peers.
I have observed some terrific CEOs at world class firms. These companies have effective Boards and support their CEOs from day one.
The boss’s boss
Boards have a fiduciary responsibility to shareholders. This includes hiring, guiding and firing CEOs. Ultimately, the CEO buck stops at the Board’s door.
Boards lacking sufficient sector and business knowledge cannot provide the requisite strategic guidance or identify risks. Dysfunctional Boards are a distraction, slowing and politicizing important decision making. When Boards are not sufficiently engaged or thinking independently, they will often fail to hold the CEO accountable. Finally, many cannabis Boards do a poor job at defining the right role, expectations and metrics for their CEO.
Good Board support begins with strong governance mechanisms but goes further. High performing Boards are good judges of leadership talent. They will also provide CEOs with informed strategic counsel & risk management, coaching and objective feedback, plus pitch in with key activities like raising money and engaging governments.
A supportive team
The CEO’s colleagues also matter. Effectual CEOs have teammates who provide him/her with timely and accurate information on the business, culture and customers – but also empathy and prudent advice. When a new CEO shows up, the staff will have an on boarding plan ready to bring him/her quickly up to speed.
The cannabis stakes are high. CEOs who don’t cut the mustard need to go. However, Boards must also ensure they are putting the right person in a properly defined role and are set up for success.
#Boards #governance #CEO #management #BoardofDirectors