- Jeff Bezos will be stepping down as CEO of Amazon and will take on a new role as executive chairman.
- Facebook will be the only tech company in the “big five” that still has its founder as its CEO.
- This type of transition is common because it keeps the company’s key visionary involved in big decisions.
- Visit the Business section of Insider for more stories.
Amazon CEO Jeff Bezos announced on Tuesday that he will be stepping down as the CEO of the online retail empire he founded in 1994 and evolved into one of the world’s most valuable technology companies.
Andy Jassy, a long time lieutenant of Bezos and CEO of the company’s booming cloud business, will replace him in the third quarter of 2021. But that doesn’t mean Bezos is done with Amazon; he’ll be stepping into a new role as executive chairman that will involve weighing in on big-picture decisions like product strategy and new projects.
If that sounds familiar, it should. Bezos is officially a member of the club of elite tech founders who have moved on from their role as CEO to focus on steering major strategic decisions and other grandiose projects.
When Larry Page and Sergey Brin officially stepped down from their respective roles as CEO of and president of Google parent Alphabet, they wrote that it was time for them to “assume the role of nagging parents, offering advice and love but not daily nagging!”
Bill Gates, the billionaire philanthropist and cofounder of Microsoft, said that he relinquished his CEO title back in 2000 to return to what he loves most: “focusing on technologies for the future.”
And now Bezos is transitioning from CEO to an executive chairman role that will allow him to focus on early initiatives and new products, while also freeing him up to focus on his other passions like Blue Origin and The Washington Post.
"Being the CEO of Amazon is a deep responsibility, and it's consuming," Bezos wrote in a letter to employees announcing his transition. "When you have a responsibility like that, it's hard to put attention on anything else."
Bezos' move means few of the biggest United States-based technology companies are still being run by their founders. Of the FAANG stock companies, an acronym that refers to tech giants Facebook, Apple, Amazon, Netflix, and Google, only Facebook and Netflix still have founders in a CEO role. The case is the same with the "Big Five" tech companies - Apple, Amazon, Facebook, Alphabet, and Microsoft. Only Facebook still counts its founder as its CEO.
There's a reason why major tech companies tend to follow this pattern, according to experts. For one, when you have a CEO that's come to be known as an iconic visionary like Bezos, the prospect of losing his involvement would surely spook investors and just about every other firm or institution that relies on the company in some way. It also gives Bezos the opportunity to steer the company at some capacity and remain in the spotlight to some degree while Jassy gradually becomes the face of the company.
"You want to go out on top, you want to go out when things are going really well," David Yoffie, the Max and Doris Starr professor of international business administration at Harvard Business School, said to Insider. "And you hand the reins to a successor who can build on the momentum that you've established."
After the news of Bezos' transition broke on Tuesday, Amazon was quick to clarify that he will still be playing an important role in the company. As executive chairman, Bezos will be involved in "one-way door" issues, Brian Olsavsky, Amazon's chief financial officer, said during the company's fourth-quarter earnings call on Tuesday. That term refers to critical decisions like acquisitions, strategy, and the decision to move into new markets like the grocery business, Olsavsky said during the call.
Bezos will still be a big part of Amazon's future
This type of transition also suggests that we shouldn't expect any major shifts in Amazon's general strategy and direction just because Bezos is no longer at the helm.
"When you see a CEO stepping into an executive chair role, it's a signal that the board really wants to stick with the current strategy," Mary-Hunter McDonnell, associate professor of management at the Wharton School at the University of Pennsylvania, told Insider. "It's not the time to bring in a new transformative CEO."
That's what makes Bezos' position of executive chairman different from a non-executive chairman, as William Klepper, author of the book "The CEO's Boss: Tough Love in the Boardroom" and academic director of executive education at Columbia Business School, points out.
"Non-executive chairman [means] they keep their nose in but their hands off of the business," Klepper said to Insider. "In this case, when you use the term executive chairman of the board, it basically means I'm not going to keep my hands off the business. . . So in many ways it's a partnership now."
Jassy, a 24-year Amazon veteran, has been known to be Bezos' second-in-command and was even his first shadow adviser, a role that involves attending every meeting alongside the CEO. Since joining the company in 1997, Jassy has become one of the most influential and important figures at Amazon, building the company's cloud business from the ground up, as Insider's Eugene Kim and Ashley Stewart detailed in their profile on Jassy.
That intimate knowledge of Bezos is critical, because what happens next for Amazon will come down to the type of executive chairman Bezos decides to be and his relationship with Jassy.
"When the chairman and the CEO have a very strong personal relationship, they're able to manage all the tensions and conflicts that inevitably will emerge," Yoffie said. "When that relationship is a little strained or a little distanced, and there isn't deep trust between the two players, it can be a really challenging problem to have the founder in that role as executive chair."
It's also especially common for founder-led tech companies to follow this protege-style succession plan because of the specific challenges tech firms face in bringing in outside leadership. Outsiders may not understand the culture and technology that's crucial to driving the company's success, according to Yoffie.
The shift to a role that's more focused on big-picture decision-making without the pressure and responsibility of daily management is also in some ways the next step in the career trajectory of a tech founder.
"Most of these companies that start in a garage," Klepper said referring to the famous Silicon Valley trope, "they grow up."