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Should Investors Worry When a C-Suite Executive Leaves?

By Brian Withers, Brian Stoffel, and Brian Feroldi – Jul 25, 2021 at 7:50AM

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It depends.

Zendesk (ZEN) recently had its chief financial officer of five years leave for another opportunity. Investors may be wondering if something is up when the person who has all the insights on the financials transitions to another position outside the company. On a Fool Live episode recorded on June 30, Fool contributors Brian Stoffel and Brian Feroldi discuss how investors can tell whether an executive transition should be worrisome to shareholders.

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Brian Feroldi: One thing I did want to ask you about is the CFO of this company who's been around for about five years decided to leave a few months ago. It was an orderly transition. Does a executive-level departure ever rub you the wrong way or how do you think about that?

Brian Stoffel: Sure. It was Elena Gomez. It's funny because as you do this job that we do, you look at the boards of directors and management of a lot of companies. I remember doing research on other companies that we've recommended in the Fool universe, I'd see her picture pop up a bunch. It's because she is on different boards of directors. My point being, she's a very connected individual. She went over to Toast, which I believe is a point-of-sale company for restaurants and food companies. Just like that name.

But to your question, what you need to do is you need to build context around any executive departure. For instance, we've got a company that had an orderly transition. This woman was not the founder of Zendesk. She seems to have done a great job and she's just transitioning to a company that I feel like she wants to help build up as well. Compare that to a company like Alteryx where they got rid of their founder as CEO and he transitioned to the board, they got someone new to come in. They hired, I believe it was a new CFO who's only there for an incredibly short amount of time and then got rid of him and replaced him with someone else. When that happens, that's concerning. But what we've got going on here with Zendesk is not something I think is worth worrying about.

Feroldi: Fair enough. Context is always key.

Brian Withers has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alteryx and Zendesk. The Motley Fool has a disclosure policy.

Stocks Mentioned

Zendesk Stock Quote
Zendesk
ZEN
Alteryx Stock Quote
Alteryx
AYX
$42.97 (6.26%) $2.53

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