The era of merciless corporate expansion has ended, and is revealed by rising interest rates and technological disruptions. This is a shift that undermines all the cost mentality that has shaped corporate America over the past decade. Survival now calls for businesses to relentlessly prioritize profitability, strategic focus and sustainable financial management over blind expansion, and change the rules of successful CEOs.
For years, businesses were supported by cheap capital, paying some attention to financial health, and often prioritizing growth over profitability and cash flow. Venture capital and low interest rate loans have promoted a culture of relentless growth, which measured success by revenue growth and market share rather than economic value.
That paradigm has collapsed. As borrowing costs continue to rise, investors do not want to subsidize speculative growth. Even the high-tech giant, long considered to be immune to traditional financial constraints, has dramatically changed course.
Across the sector, CEOs and boards are reassessing their strategies, prioritizing the strengths of their core business, and prioritizing sustainable financial performance over fierce growth.
It's a difficult and balanced act to manage, relying on careful viewing of margins and financial discipline, driving more executives to the door.
Leading a successful company has never been an easy task, but recently there has been a dramatic increase in the number of top executives leaving their posts. In 2024, 202 US CEOs resigned and earned record numbers. Significantly, only 22% of these moves are planned transitions, a stunning indicator of leadership instability. Nike, Southwest, Intel and hundreds of other companies have seen exit at the highest level of leadership as investors demand greater financial discipline.
Activist investors are increasingly becoming a real threat to boards and CEOs, essentially restructuring their corporate strategy. What used to be a mere passing trend is now a daily reality.
Activist investors launched 243 campaigns in 2024, the highest total since 2018. Last year, 27 CEOs resigned at a company targeted by activists.
Leading your business has become more demanding than ever before. Boards and executive teams need to navigate financial and market challenges, technical disruption, geopolitical risks and increased public scrutiny. Doubling growth in this environment is not enough. Companies are expected to provide returns for increasingly complex stakeholder expectations. Meeting these expectations is at a high standard and there are companies and leadership who cannot adapt to the risk of being demolished from the outside.
Part of the transformation that must occur under this new macroeconomic environment is re-aligning executive incentives to these new success metrics that shareholders are demanding. A successful board is a responsive and aggressive board to understand governance systems. This is also important in avoiding interfering activists.
Because activist investors often target governance structures, this is why many of these interventions end with board flips or CEO departures.
However, avoiding activists also relies on creating strategic alignments across the organization. The most successful companies today understand that profitability isn't just about reducing costs. Toyota provided a prime example, resisting the gold rush of electric vehicles, maintaining hybrid focus, and competitors struggled with expensive, unproven investments. Disney systematically cuts down its low-performing assets to cut its core business. Southwest Airlines is being forced to rethink its customer experience model to meet investor expectations.
Successful leaders must understand that saying “no” is often more important than saying “yes” and become expert prioritization agents. They must focus their resources relentlessly on what really matters and resist the temptation to chase every opportunity. This means developing clear, viable strategies and practical plans that are consistent with the basic capabilities of the company.
Cultural alignment is equally important. Leadership needs to clearly define and consistently strengthen the organization's expectations. Companies like JPMorgan Chase and Meta demonstrate how strong and consistent cultural messaging can generate stability, even amid major strategic changes.
Inconsistency between leadership and corporate culture leads to resistance, departure and talent drainage. The board must ensure that organizations will attract exemplary leadership and create an environment where they can succeed.
Passforwards need a comprehensive approach that aligns executive incentives over the long term, maintain a strategic focus, build a robust leadership pipeline, strengthen the organizational culture, and communicate transparently with stakeholders. Companies that master these factors create sustainable structures that can withstand economic volatility and ensure long-term success.
The message is clear. Profitability is not a constraint, it is a competitive advantage. In an age of economic uncertainty, businesses must evolve from a company plagued by growth to a financially disciplined, strategically focused organization. A company that survives and thrives will understand the basic truth. Sustainable success is not just how quickly you can grow, but how effectively you can generate value.
This volatility underscores the urgent need for companies to develop a robust, internally focused leadership pipeline.
