For anyone watching US news headlines, Cracker Barrel's new CEO, David Deno, started yesterday, after a controversial rebranding failed. Most of the commentary says the board took too long to make a change, but I'm not sure that really holds up.
The plan for the rebranding came from the management. The CEO and her team built it and the board approved it. The CAPEX was budgeted at $600-700M over three years vs. $3.5B in annual revenue. That approval was not a rubber stamp.
Four quarters rebuilding the plan before the CEO change
Unfortunately, the campaign failed within a week of launching. Take a look at the board timeline following that. Store remodeling paused in September, support center costs were cut in December, the "five pillars" plan was reframed into three in January, capex guidance was reduced four quarters running, and then 26 stores were sold and leased back in July. The CEO change came a week after that, so four quarters rebuilding the plan before anyone decided it was time for a management change. Whatever else that is, it isn't a board sitting still.
Only one person can be accountable in this scenario, and that's the CEO. The board is responsible, and they rallied around the CEO and management team to try to recover the business. Responsibility can be shared where accountability cannot. If the plan itself was wrong from the start, the shake-up shouldn't stop at the person who was accountable for it.
For scale
I don't have enough information to say what board change is needed; however, three proxy advisers said last November that change was warranted. Since that time one director left after the vote, no replacement has been named, and the only seat the board changed was the CEO's.
Departing S&P 500 CEOs last year averaged nine years in the seat. This one had three, about two of them spent on a plan the board had signed off. Now look at the other side of the table. S&P 500 boards refreshed 7% of their directors last year against a 13% CEO succession rate, appointed the fewest new independent directors since 2016, and the main driver of director departures is still a mandatory retirement age rather than performance. The accountable seat turns over about twice as often as the responsible ones, and for different reasons.
