A lucrative consolation prize: Inside the multimillion-dollar retention deals for CEO runnersup

"A leader who has ascended to the level of CEO contender is likely a high performer with broad institutional knowledge and deep relationships, both inside and outside the firm. Such a star walking out the door can scramble organizational operations, ruin team morale, and dent a company's bottom line, with top executive turnover typically costing many multiples of the person's annual salary."

"A recent report from consultancy FW Cook found that the grants have a strong, but limited, retentive effect—typically lasting approximately two to three years. That time frame likely reflects the awards' vesting schedules, says Marco Pizzitola, a consultant at FW Cook and co-author of its new report."

"Once you get either all of the award or the majority of the award, the retentive glue has passed. If you were someone who was going to leave the company anyway, whether it's because you're disappointed about not getting the CEO role or because you've simply reached the end of your career, or whatever reason; if the retentive grant is the one thing keeping you around, you're likely to leave."

When CEO succession races conclude, losing candidates often receive substantial financial incentives to remain with their companies. Disney granted Dana Walden $5.26 million in stock plus $27 million annual compensation after Josh D'Amaro's selection, while Morgan Stanley paid three runner-up executives $20 million bonuses each. These packages reflect the significant costs of losing top talent—executives at this level possess institutional knowledge, broad relationships, and leadership capabilities whose departure can disrupt operations and damage morale. Research shows these retention grants are effective for approximately two to three years, typically aligning with vesting schedules. After awards fully vest, their retentive power diminishes, and executives may depart regardless of compensation.

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