OpenAI Investors Happy Sam Is Back. But Data Say 'Boomerang CEOs' Underperform

Dumping that guest badge, Sam Altman is back as CEO at OpenAI after a tumultuous and rancorous week. Investors are thrilled and venture firms are breathing a sigh of relief that the turmoil will not drive anticipated AI riches off the rails. 

But there is an element of being careful what you wish for here. Research indicates that while so-called 'boomerang CEOs' are not uncommon - Steve Jobs being the most notorious case in point - the data also reveal that they tend to underperform after returning by as much as 10% on average. The implication in this case is that the underlying concerns about mission, ethics, dangers and other unresolved debates about the future of AI remain significant points of disagreement among tech workers and investors. And that while tech has almost always come down on the side of profit-uber-alles, these strains could make Sam Altman's next act less melifluous as investors and regulators pay even more critical attention than before. JL  

Becky Sullivan reports in NPR, Thomas Mackintosh and Chris Vallance report in the BBC:

Ousted CEOs who return to their companies - known as "boomerang CEOs" - are a prominent genre of company leader. (Some) could also be called boomerang founders. Among them are Jack Dorsey of Twitter, Michael Dell and Steve Jobs. But research suggests boomerang CEOs, including founders, perform worse than first-time chief executives. Researchers studied the boomerang CEO effect, comparing the performance of such CEOs to thousands of other top executives at S&P 1500 firms over a 25-year period. On average, the annual stock performance of their companies was more than 10% lower than first-time CEOs. There's no indication Altman was a poor manager (but) "the organization's internal chaos over the last few days is likely to have a lasting impact."

OpenAI co-founder Sam Altman will return as boss just days after he was fired by the board, the firm has said.

The agreement "in principle" involves new board members being appointed, the tech company added.

Mr Altman's sacking on Friday astonished industry watchers and led to staff threatening mass resignations unless he was reinstated.

"I am looking forward to returning to OpenAI," Mr Altman said in a post on X, formerly Twitter.

He added: "I love OpenAI, and everything I've done over the past few days has been in service of keeping this team and its mission together.

Last week, the board decided to remove Mr Altman, which led to co-founder Greg Brockman's resignation, sending the star artificial intelligence (AI) company into chaos.

The decision was made by the three non-employee board members, Adam D'Angelo, Tasha McCauley and Helen Toner, and a third co-founder and the firm's chief scientist Ilya Sutskever.

But on Monday Mr Sutskever apologised on X, and signed the staff letter calling on the board to reverse course.

Microsoft, which uses OpenAI technology in many of its products - and is its biggest investor - then offered Mr Altman a job leading "a new advanced AI research team" at the tech giant.

Then on Wednesday, OpenAI said it had agreed Mr Altman's return to the tech company in principle, and that it would partly reconstitute the board of directors that had dismissed him.

 

Former Salesforce co-CEO Bret Taylor and former US treasury secretary Larry Summers will join current director Adam D'Angelo, OpenAI said.

In a post on X, Mr Brockman also said he would be returning to the firm.

Emmett Shear, who had been appointed OpenAI's interim chief executive, said he was "deeply pleased" by Mr Altman's return after about "72 very intense hours of work".

Microsoft boss Satya Nadella said the firm was "encouraged by the changes to the OpenAI board".

"We believe this is a first essential step on a path to more stable, well-informed, and effective governance."

For a brief moment in a turbulent weekend in Silicon Valley, it seemed that tech CEO Sam Altman might become the latest ousted executive to return to the organization he helped to found — in this case, OpenAI, the artificial intelligence company who forced the entire tech industry to reorient when it released ChatGPT last year.

After his sudden firing Friday by OpenAI's board of directors, hundreds of OpenAI employees threatened to quit if Altman was not brought back. Investors campaigned to reinstate him. And Altman himself hinted at a possible return Sunday, less than 48 hours after the company's board announced his departure, when he posted a photo of himself wearing an OpenAI visitor badge to the social media site X. ("The first and last time I ever wear one of these," he wrote.)

Ousted CEOs who return to their companies, usually after an absence of several years — also known as "boomerang CEOs" — are a small but prominent genre of company leader. Often, companies turn to former executives in times of crisis or transition, like Bob Iger of Disney or Howard Schultz of Starbucks.

An outsize share of returning CEOs could also be called boomerang founders, or those who are coming back to the company they helped to found.

Jobs is certainly a unique case — yet, surprisingly, many other large and high-profile companies have turned to former CEOs, often called boomerang CEOs, in times of need. Dell, Enron, Google, Twitter, Snapchat, Best Buy, Starbucks, Yahoo, DuPont, Procter & Gamble, J.C. Penney, Reddit, Bloomberg, Urban Outfitters, and Charles Schwab, among others, all had former CEOs return to lead their organizations.

Among them are Jack Dorsey of Twitter, who was canned by Twitter's board in 2008 before returning in 2015, and Michael Dell, who stepped down from his namesake computing company in 2004 before its board asked him to return three years later.

Perhaps no founder has found more fame or success in returning than Steve Jobs, who co-founded Apple in 1976 and departed nine years later. After his return in 1997, Jobs steered the struggling Apple to the cultural powerhouse it remains today on the backs of products like the iPod and iPhone.

But research suggests that boomerang CEOs, including those who were founders, perform worse than first-time chief executives.

"Boomerang founders might be a sentimental story of re-unification between the company and its old founder CEO but the reality points that such returning CEOs make things worse," Kalin Kolev, a business professor at Marquette University, wrote in an email to NPR.

Kolev and a team of researchers studied the boomerang CEO effect, comparing the performance of 167 such CEOs to thousands of other top executives at S&P 1500 firms over a 25-year period.

They found boomerang CEOs performed "significantly worse," said co-author Chris Bingham, a professor at the University of North Carolina Kenan-Flagler Business School.

On average, the annual stock performance of their companies was more than 10% lower than their first-time CEO counterparts, the researchers found.

"Between the time in which they leave and return, changes inevitably occur in consumer preferences, competitors, suppliers, demographic shifts, or the broader economy," Bingham wrote in an email to NPR. That dynamic is especially true of fast-changing industries, like tech, he added.

And founders face particular challenges as returning CEOs, Kolev said.

"Founders are usually entrepreneurs who possess skills necessary to run a new venture," he said. "However, they often lack the administrative skills to run a larger and more complex firm."

In Altman's case, a potential return to OpenAI after only several days' absence would set him apart from most boomerang CEOs. And there's no indication he was a poor manager overwhelmed by the size or changes at the company.

"He has been out for [a] few days and nothing significant has changed with the company and the surrounding context/environment," Kolev said. "Him coming back might have a calming effect given the strong support he has among employees."

However, Bingham cautions that "the organization's internal chaos over the last few days is likely to have a lasting impact if Altman does in fact return."