Can Asda chief buck the trend of the boomerang CEOs?

Allan Leighton returned to Asda’s headquarters in Leeds this week as its newly appointed executive chairman with a mission to “restore Asda’s DNA” 24 years after he last left the building as chief executive.
Leighton’s surprise reappointment to lead the retail chain, which is struggling against fierce competition from discount retailers as well as a mountain of debt and an IT nightmare, means he is the latest to join a growing trend of so-called “boomerang CEOs”.
“It used to be exceptionally rare that a board would look to the past for a solution,” says professor Randall Peterson, director of the Leadership Institute at London Business School. “But now it seems to be happening on a fairly regular basis. Boards are increasingly impatient and want quick, tangible results. When it doesn’t happen they turf the CEO out, and now often look backwards for that safe pair of hands they once had.”
Going back in time can work exceedingly well, Randall says. There is no better example than Steve Jobs. Apple’s board forced co-founder Jobs out in 1985, but the company faltered without him. Twelve years later, with the Californian technology company on the brink of bankruptcy, Jobs was recalled as chief executive.
He refocused the company on its core tech and brought in Jony Ive, a British designer, to “think differently” and invent a series of standout consumer products, including the iPhone. Apple quickly became one of the world’s most valuable companies.
“It worked spectacularly well with Jobs and Apple,” Randall says. “But for every boomerang success there are a lot of failures.”
Procter & Gamble, the consumer goods giant that owns Gillette razors and Head & Shoulders shampoo, sought a “Steve Jobs-like sequel” when it recalled its former chief executive Alan George “AG” Lafley in 2013. But under his second term P&G lost market share to rivals and the flagging share price led to Lafley’s exit (this time for good) just two years later.
The return of Kenneth Lay as chief executive at Enron in 2001 quickly preceded the spectacular collapse of the energy company that was once valued at $70 billion. Lay was convicted of six counts of securities and wire fraud for his role in the accounting scandal, for which he could have faced up to 45 years in prison. He died of a heart attack in July 2006, before sentencing.
Research by academics at the Sloan School of Management at Massachusetts Institute of Technology suggests that while boards might believe past leaders are a safe pair of hands, investors’ cash is on average less safe invested in companies led by boomerang CEOs. They analysed the share price performance of 167 US-listed companies under the tenure of boomerang CEOs between 1992 and 2017 compared with more than 6,000 companies run by a first-timer.
“The differences in our data were striking: boomerang CEOs indeed performed significantly worse than other types of CEOs,” the researchers said. “On average, the annual stock performance of companies led by boomerang CEOs was 10.1 per cent lower than their first-stint counterparts. These results held true even when we compared them with other (non-boomerang) CEOs who were hired in times of crisis.”
A key reason for failures, they say, is that the companies the former leaders were returning to had changed, sometimes dramatically, in the preceding years. “These changes are especially pronounced and problematic in dynamic and fast-changing industries — in which boomerang CEOs performed much worse, per our data — as the value of the boomerang CEOs’ accumulated experience depreciates much more quickly.”
Groceries might not evolve nearly as quickly as technology but Asda, and the challenges it faces, will not be the same as when Leighton, 71, stepped down as chief executive in November 2000.
“Asda is a completely different company now, and the environment it is operating in is also completely different,” says Joanne Murphy, professor of inclusive leadership at Birmingham Business School. “The challenges that Leighton was great at tackling the first time aren’t the challenges that Asda is facing now. It’s not just pricing and the cost of living crisis, but technology and AI.”
The first time that Leighton led Asda, between 1996 and 2000, he and then chairman Archie Norman were credited with saving the chain from bankruptcy and orchestrating its sale to Walmart for £6.7 billion. Back in the office this week, Leighton said: “I am delighted to be returning to the business which has always been a special place for me.”
While many boomerang CEOs struggle to bring back their past magic on the second attempt, others have performed spectacularly well, particularly if they were a founder or intrinsically linked to the company.
Charles Schwab, the US bank founded by its namesake in 1971, lost its way after Schwab stepped back from the top job in 2003. A year later, with profits falling, the board axed his replacement and Schwab returned. He warned that the firm had “lost touch with our heritage” and refocused the business on providing financial advice to investors. The shares rebounded.
Howard Schultz might not have founded Starbucks but he propelled it from a small Seattle chain to an American, and then worldwide, giant after buying the company from its founders in 1986.
Schlutz has returned to lead Starbucks not once, but twice. He stood down as chief executive for the first time in 2000, before returning during the 2008 financial crisis when he fired masses of head office staff and closed hundreds of underperforming stores to bring the company on to a more secure footing. When the economy recovered he led a mass expansion programme before standing down in 2018. He returned again as interim chief executive in 2022 when Starbucks was struggling in the wake of the pandemic and global lockdowns.
In 2022 Bob Iger was reappointed to lead Disney, just two years after he retired, after the board ousted his hand-picked replacement Bob Chapek. Iger had previously run Disney for 15 years, during which he made a series of big acquisitions, including the Marvel and Star Wars film franchises and the animation studio Pixar.
Announcing his reappointment in November 2022, the company highlighted the fivefold increase in Disney’s market value under his previous leadership. It said he had a “mandate from the board to set the strategic direction for renewed growth” while it looked once more for a long-term successor. Two years later he is still chief executive and has had his contract extended until 2026. Last year he earned pay and bonuses of $31.6 million.
In the UK, Sir Malcolm Walker, the founder of Iceland, returned to rescue the company he started with one store in Oswestry, Shropshire, in 1970. The chain grew rapidly, making Walker a fortune, but he was forced out following a share sale scandal in 2000, after which no charges were brought by the Serious Fraud Office. Without him, the company struggled and issued repeated profits warnings until new owners called Walker back in to run it in 2005.
“It’s not rocket science. I ran this business for 30 years and increased sales and profits for 29 of them. Then we had four years of decline,” he said shortly after taking back the top job. “Now I am back, and sales and profits are on the increase again. But that is probably just a coincidence. They had four store formats. I only have one format: frozen food stores.”
Iceland, which is now run by Sir Malcolm’s son Richard, recently reported annual profits of £315.7 million (up 24 per cent) on sales of £4.2 billion.
Sankalp Chaturvedi, professor of organisational behaviour and leadership at Imperial College Business School, believes that Leighton could bring about a similar recovery at Asda. “It is rapidly losing market share and risks losing the third place slot (behind Tesco and Sainsbury’s) to the discounters,” says Chaturvedi. “So they really need to act fast.
“Leighton’s experience is undeniable, and he has the best connections in the industry. But the question is how much has Asda changed since he’s been away. Will he know what to cut, how much to cut, and importantly what not to cut?
“We will know soon enough whether it works, but one thing is for sure — he will be getting a very fat pay cheque to give it a go.”