Interim CEOs: A Symptom Of Deeper Governance Failures

Forbes

31-05-2025

Interim CEO Wanted
In early 2025, CEO departures reached record highs. Interim appointments surged—but behind the numbers is a more troubling signal: boards are increasingly unprepared. (I highlighted this alarming trend in my most recent column.) While interim CEOs can provide temporary stability, their increasing prevalence points to deeper issues in corporate governance and succession planning.
Recent data indicates that nearly 25% of new CEOs appointed in the first two months of 2025 were on an interim basis, a significant increase from 8% during the same period in 2024. This surge suggests that many organizations are unprepared for sudden leadership transitions, often resorting to interim appointments as a stopgap measure.
While interim CEOs can offer short-term solutions, they also introduce several governance risks:
Recent academic research supports these concerns. A study entitled Interim CEO Successions: Implications for CEO Successor Selection and Subsequent Firm Performance found that companies appointing permanent CEOs following an interim period tend to underperform compared to those with direct permanent appointments. Another study entitled: 'Timely help' or 'one disaster after another': The impact of potential and transition interim CEO succession on corporate performance highlights that interim CEOs, especially those serving as temporary placeholders without prospects for permanent appointment, may face challenges such as limited authority and reduced internal cooperation, leading to slower strategic decision-making and potential declines in firm performance.
The appointment of an interim CEO often sends a cautionary signal to the investor community. It may indicate that a company lacks a robust succession plan, leading to concerns about strategic continuity and organizational stability. Investors may perceive such appointments as a sign of internal uncertainty, potentially impacting stock performance and stakeholder confidence.
From the employee's viewpoint, the appointment of an interim CEO can trigger deep uncertainty about the organization's future. It may signal instability at the top, raising concerns about job security, stalled initiatives, and potential cultural disruption. Without a clear, permanent leader, employees may worry that strategic priorities will shift—or be put on hold altogether—affecting morale, engagement, and retention. Especially in cases where communication is lacking, interim leadership can be perceived as a temporary fix, not a source of direction or long-term vision, prompting top talent to consider exit strategies.
This concern is particularly acute given that talent acquisition and retention rank among the top three priorities for CEOs, according to The Conference Board's C-Suite Outlook 2025: Seizing the Future report. In an environment where leadership stability is closely tied to employee confidence and organizational performance, the presence of interim leadership can undermine efforts to attract and retain key talent, exacerbating existing workforce challenges.
Despite the risks, interim CEOs can be beneficial when used strategically:
However, these benefits are only realized when interim roles are part of a well-thought-out governance strategy rather than a reactionary measure.
Several factors contribute to inadequate succession planning:
These issues are compounded by a trend of shorter CEO tenures, averaging just 8.3 years, indicating decreasing tolerance for missteps and increasing pressure on boards to find quick replacements.
The increasing dependence on interim CEOs underscores the need for robust succession planning. Boards and CHROs must collaborate to:
By proactively addressing succession planning, organizations can minimize disruptions, maintain stakeholder confidence, and ensure sustained performance.
In conclusion, while interim CEOs can serve as effective short-term solutions, their rising prevalence signals deeper governance challenges. Organizations must prioritize comprehensive succession planning to navigate leadership transitions successfully and uphold corporate stability.