An outside CEO's misunderstanding of a core business model can be catastrophic. The new CEO pivoted from a high-margin, recurring-revenue model to chasing large, complex projects. This mismatch resulted in a $12 million loss on $20 million in revenue, halving the company's EBITDA in just nine months.

PE sponsors can accelerate value creation by telling new CEOs that some new executive hires are expected to fail. This pre-approval removes the CEO's fear of appearing to have failed themselves, encouraging them to make necessary talent changes faster and more decisively.

Lawyers are paid to minimize legal risk. A CEO's unique role is to balance that counsel against other crucial factors like customer trust, employee morale, and future opportunities. Ceding decision-making entirely to the legal team is a failure of leadership that can lead to catastrophic, albeit less immediately visible, losses.

The most common failure mode for a founder-CEO isn't a lack of competence, but a crisis of confidence. This leads to hesitation on critical decisions, especially firing an underperforming executive. The excuses for delaying are merely symptoms of this confidence gap.

A CEO who stays too long creates an organization optimized to respond only to them, causing other skills and response mechanisms to weaken. Leadership changes are healthy because they force a company to develop a more balanced and resilient set of capabilities, breaking the imperial CEO model.

Even with full board support, a successor CEO may lack the intrinsic 'moral authority' to make drastic 'burn the boats' decisions. This courage is harder to summon without the deep-seated capital a founder naturally possesses, making company-altering transformation more challenging for an outsider.

PNC's CEO explains their stock was "crushed" because the market priced in the risk of an expensive acquisition, a penalty for being a likely consolidator in a favorable M&A environment. This occurred despite the company reporting record financial performance.

According to Terry Smith's own team, the single best indicator to sell a stock is when he becomes personally frustrated with management. He cites selling PayPal after its CEO expressed dismay over the war in Ukraine during a meeting, signaling a critical lack of focus on the company's deteriorating fundamentals.

Journalists frequently misinterpret high-profile departures because the true dynamics are known only to a few insiders. An exit reported as a major loss might internally be a welcome change that unblocks an organization, but the public narrative rarely reflects this complexity.