August 2, 2020; Associations Now
Forgive us our speculation, but when we saw an article in Associations Now a few days ago about CEO compensation, it made us wonder: Why now? We are in the middle of a pandemic and a recession. How big an issue can this be, compared to other timely concerns? Then we read the article and started making some connections…
The article starts with this little anecdote:
Nonprofit lawyer Jeffrey S. Tenenbaum has noticed a change in his workload lately. For most of his career, Tenenbaum, managing partner of Tenenbaum Law Group, always spent more time working on association CEO employment contracts than on CEO termination agreements. These days, though, he’s been spending an equal amount of time on both. And though he doesn’t have hard data on whether more association CEOs are exiting due to the pandemic, he’s seeing associations looking for innovative, turnaround CEOs—and perhaps casting off leaders who don’t fit that definition.
Now, let’s look at this graph, which indicates what happened to mutual benefit associations during and immediately following the last recession. More organizations failed in that category than in others, when revenues plummeted and never seemed to fully recover.
Maybe what we have here is more interesting than just CEOs coming and going. It seems the field is looking for turnaround magicians as we go into a scenario that looks like it could pile more damage upon the damage done during the last downturn.
This concern makes sense. For many associations, conferences and memberships are core to their revenue strategies, and in a time of pandemic and the tightened belts of recession, that spells great challenges ahead. (Rick Cohen actually wrote about the dynamics back in 2009.)
This all makes the next bit of advice for those looking to lead during this period particularly pertinent:
Plan for the end before you start. “I think one of the—if not the—most important part of the CEO employment contract is the prenup,” he says. Consider what the contract says about what benefits and compensation the CEO is due if his or her tenure ends: the amount of severance, the length of the severance period, and which benefits will remain in place during that period. One critical element of the contract is language about terminations for cause or without cause, which have distinct effects on what compensation the departing CEO receives.
The search for a new CEO, then, becomes the search for a new path through unknowable terrain. We may not agree with this approach to a new job in the sector, but it provides a pretty strong sense of all attendant risks. However, it’s unfortunate that this is oriented around a new CEO position. Associations are about networks and collective intention, and this reinforces the importance of one miraculous individual.—Ruth McCambridge