"Two Heads Are Better Than One"...More Companies Adopt Co-CEO Model as Founders Step Back

Spotify, Oracle, and Comcast Adopt Co-CEO Model
Concerns Over Potential Power Struggles
Advantages in Shareholder Returns, Talent Retention, and Crisis Management

The Wall Street Journal (WSJ) recently reported that major U.S. companies are adopting a co-CEO system as their founders step back from day-to-day management.

Last month, Spotify announced that CEO Daniel Ek would step down from his role and become chairman of the board starting next year. Gustav Soderstrom, Chief Technology Officer, and Alex Norstrom, Chief Business Officer, will serve as co-CEOs. Oracle has also decided to return to a co-CEO structure. Comcast will appoint President Mike Cavanagh as co-CEO starting in January next year.

Reuters Yonhap News

This trend appears to be driven by boards believing that "two heads are better than one." By combining each executive's strengths, the burden of leading a large organization can be reduced.

The co-CEO system often emerges when founders are searching for successors. Among companies in the Russell 3000 Index, 33 currently have co-CEOs this year, and two-thirds of these are either the founders themselves or their successors.

Ranjay Gulati, a professor at Harvard Business School, described this as a risk diversification strategy, likening it to "not putting all your eggs in one basket."

If responsibilities are clearly defined, the co-CEO system can coexist stably. Joseph Bae and Scott Nuttall of private equity firm KKR have led the company as co-CEOs since 2021, following the departure of co-founders Henry Kravis and George Roberts from the co-CEO roles.

Netflix has also maintained a co-CEO structure for five years. Co-founder Reed Hastings led the company alongside Ted Sarandos, and since 2023, Greg Peters has served as co-CEO with Sarandos. Governance experts have analyzed that this system is effective because the two leaders have clearly differentiated areas of expertise.

However, the co-CEO system can lead to power struggles. For this reason, companies such as Salesforce and SAP adopted co-CEO arrangements but later discontinued them.

Rakhila Anwar, CEO of corporate advisory firm Group 360 Consulting, stated, "It is rare for the co-CEO model to work effectively," explaining, "It is essentially asking two people to act as one."

In fact, according to data provider Equilar, only about 1.2% of Russell 3000 companies have co-CEOs, and the average tenure for co-CEOs is just 2.6 years-half that of sole CEOs, who average 5.6 years.

For shareholders, having two CEOs may be more beneficial than one. A 2022 study published in the Harvard Business Review compared shareholder returns at 87 companies with co-CEOs to those at 2,200 companies worldwide. The annual average shareholder return for co-CEO companies was 9.5%, higher than the 6.9% return for the comparison group.

Mark Feigen, CEO of management consulting firm Feigen Advisors, explained, "This is not about splitting a job, but about doubling the capabilities."

It can also help prevent talent loss. When only one person is promoted internally, other strong candidates may leave the company, but appointing two can eliminate this risk.

There are also advantages in emergency succession. For example, when former Oracle co-CEO Mark Hurd stepped down for health reasons and passed away a month later in 2019, the remaining co-CEO, Safra Catz, was able to seamlessly continue as sole CEO and maintain the company's stability.