Hertz CEO Stephen Scherr leaves with Push-out Score of 9

  • After about two years in the position
  • Praise for Scherr
  • Gil West taking over
  • Scherr kept it short and said 48 words

(exechange) — Estero, Florida, March 15, 2024, updated March 18, 2024 — Stephen Scherr, chief executive of Hertz, leaves his position. As announced by Hertz Global Holdings Inc. in a news release on Friday, March 15, 2024, Stephen M. Scherr leaves his post as chief executive officer at the car-rental company, after about two years in the role, effective March 31, 2024.

Generally speaking, it raises questions when a CEO leaves his post at short notice and after a short tenure.

Stephen Scherr’s duties as CEO will be taken over by Wayne Gilbert (Gil) West, previously Chief Operating Officer at Delta Airlines and GM’s Cruise unit.

The fact that Stephen Scherr’s successor is brought in from outside suggests that the board may seek to stimulate change with fresh ideas and new initiatives.

In general, an outsider does not have the constraints of an insider when it comes to leading painful changes or making unpopular decisions.

“Working with the team to achieve its potential”

Hertz did not give an explicit reason for Stephen Scherr’s departure from the CEO post. West stated: “I look forward to working with the team to achieve its potential for our customers, team members and shareholders.”

Precise information regarding Stephen Scherr’s future plans was not immediately available.

“Step down”

Hertz said: “West will succeed Stephen Scherr, who has decided to step down as Chief Executive Officer and member of the Board of Directors on March 31, 2024.”

“Not because of any disagreement”

Hertz stated in a regulatory filing published on March 18, 2024: “Mr. Scherr’s resignation was not because of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. Because Mr. Scherr is voluntarily resigning his positions with the Company, he will be entitled to receive his salary through March 31, 2024, but will not be entitled to any post-termination severance benefits from the Company.”

Share price decline since February 2022

The announcement follows a decline in Hertz Global Holdings Inc.’s share price of 62% since February 2022. February 2022 is the month in which Scherr’s tenure as CEO began.

In the position of CEO since 2022

Stephen Scherr became CEO of the Company in 2022.

West and Scherr will work together over the next several weeks to ensure a smooth transition.

Scherr has served as Chief Executive Officer and a member of the Company’s Board since February 2022.

Scherr was appointed Chairperson of the Board in January 2023.

Prior to joining the Company, Scherr spent nearly three decades at Goldman Sachs, leading a range of strategic and operational functions.

He most recently served as Chief Financial Officer of Goldman Sachs Group, Inc. (“Goldman Sachs”), a global investment banking, securities and investment management firm, from 2018 through 2021, and CEO of Goldman Sachs Bank USA and Head of the Consumer & Commercial Bank Division from 2016 to 2018.

Prior to joining Goldman Sachs, Scherr practiced law.

48 words by Stephen Scherr

In the release announcing his departure as CEO of Hertz Global Holdings Inc., Stephen Scherr received praise.

In announcing his departure, Stephen Scherr kept it short and said 48 words.

“Changing automotive landscape”

Stephen Scherr stated: “Over the last two years, the Hertz team has worked diligently to put the company on track for long-term success in a changing automotive landscape. Hertz is well-positioned for the future, and I look forward to seeing the company execute on its strategy as a leader in mobility.”

Push-out Score for Stephen Scherr’s move determined

The Push-out Score™ determined by exechange gauges the pressure surrounding Stephen Scherr’s move on a scale of 0 to 10.

Push-out Score: 9

The Push-out Score regarding Stephen Scherr’s move is 9, suggesting that it seems extremely likely that Stephen Scherr felt pressure to leave his post.

One point is given for each of the following parameters:

  • the form of the announcement,
  • the language in the announcement,
  • the age of Scherr (he was 58 years old (on the date the company filed its latest proxy statement)),
  • the fact that Scherr leaves his post at short notice (16 days after the announcement date),
  • his short tenure as Chief Executive Officer of Hertz (two years and two months (as of March 31, 2024)),
  • the stock price performance (Hertz Global Holdings Inc.’s share price has declined since February 2022),
  • the fact that Hertz did not give an explicit reason,
  • the circumstances of the management change (as described, among others, in the section “Critical time,” see below) and
  • the fact that the successor is brought in from outside.
In-depth analysis

With a Push-out Score of 9, Stephen Scherr’s departure as CEO of Hertz Global Holdings Inc. is near the top of the scale.

All criteria of the analysis model suggest that Scherr presumably faced pressure to leave his post as CEO.

The age of Scherr of 58 years (on the date the company filed its latest proxy statement) is relatively low, and precise information regarding his future plans was not immediately available. That’s the first point for the Push-out Score.

The notice period of 16 days is particularly brief. Point number 2.

The duration of Scherr’s tenure as CEO of two years and two months (as of March 31, 2024) is particularly short. Point 3.

The company’s stock price performance is disappointing. The announcement follows a decline in Hertz Global Holdings Inc.’s share price of 62% since February 2022. February 2022 is the month in which Scherr’s tenure as CEO began. Point 4.

The reason for the leadership change is not completely transparent. Point 5.

The circumstances of the management change are challenging. Point 6.

The succession plan raises questions. Point 7.

The form and language of the announcement provide points 8 and 9.

Conclusion: Age, notice period, tenure, share price development, official reason, circumstances, succession plan, form of the announcement and language in the communication raise nine red flags.

Forced (provisional assessment)

For academic researchers: According to the Simplified Push-out Algorithm™ (SPA) and the data available, the executive change is provisionally classified as forced. According to the SPA, the change may be classified as voluntary if the departing executive takes a comparable or superior position within three months.

7 of 7 relevant criteria are fulfilled:

  • Low age (Scherr was 58 years old (on the date the company filed its latest proxy statement))
  • Short notice (Scherr leaves his post at short notice (16 days after the announcement date))
  • Short tenure as Chief Executive Officer of Hertz (two years and two months (as of March 31, 2024))
  • Conspicuous stock price performance (Hertz Global Holdings Inc.’s share price has declined since February 2022)
  • Non-transparent reason (a reason is not explicitly provided)
  • Critical time (the circumstances of the management change are challenging (as described, among others, in the section “Critical time”))
  • Succession issues (a successor is brought in from outside)
Critical time

Scherr steps aside at a critical time for Hertz Global Holdings Inc.

Hertz has been struggling with higher repair costs and weak demand for the electric vehicles it offers on rent.

On January 11, 2024, Hertz had announced that it has made the strategic decision to sell approximately 20,000 electric vehicles from its U.S. fleet, or about one-third of the global EV fleet.

On February 6, 2024, Hertz reported results for its fourth quarter 2023.

Fourth quarter 2023 revenue was $2.2 billion, up 7% from the fourth quarter of 2022.

Adjusted Corporate EBITDA was negative $382 million in the quarter, a negative 17% margin, which includes $245 million of incremental net depreciation expense related to the EVs held for sale.

Gil West taking over

The duties of Stephen Scherr will be taken over by Gil West (63) as Chief Executive Officer, effective April 1, 2024.

Gil West, former Chief Operating Officer of Delta Airlines and General Motors’ Cruise unit, will become Chief Executive Officer effective April 1, 2024, at which time he will join the Board.

General Motors’ Cruise unit

Gil West served as Chief Operating Officer of Cruise, GM’s majority-owned autonomous vehicle subsidiary, from January 2021 to December 2023.

On January 8, 2021, Cruise had announced that it had hired Gil West as its first COO.

On December 14, 2023, Reuters had reported that General Motors’ Cruise robotaxi unit dismissed nine key people amid an ongoing safety investigation, including Chief Operating Officer Gil West.

Delta Airlines

Gil West served at Delta from 2008 to 2020.

West joined Delta in 2008 as senior vice president – Airport Customer Service and was instrumental in leading operations integration work during Delta’s merger with Northwest Airlines and driving customer satisfaction improvements in Delta’s internal customer measurements as well as Net Promoter scores.

In 2012, he assumed responsibility for leading the airline’s internal maintenance operations at Delta TechOps as well as its maintenance, repair and overhaul (MRO) provider business. In 2013, Delta TechOps achieved 119 days of zero maintenance-related flight cancels.

West became Executive Vice President & Chief Operating Officer at Delta on March 1, 2014.

Effective October 2, 2020, Gil West retired as Senior Executive Vice President & Chief Operating Officer at Delta.

Before joining Delta, West was president and chief executive officer of Laidlaw Transit Services, a provider of transportation services.

Prior to that he served as CEO for a private equity firm, as president and COO of TIMCO Aviation Services and in leadership positions at Northwest Airlines, United Airlines and The Boeing Company.

The posts he held or still holds include, among others, positions at

  • the board of directors of Forward Air Corporation and Genesis Park Acquisition Corporation;
  • the Brevard College Board of Trustees in North Carolina;
  • the Board of Directors of Wheels Up Partners;
  • the Board of Directors of the American Cancer Society; and
  • the Executive Leadership Council of the American Cancer Society.

Gil West holds a Bachelor of Science in Mechanical Engineering from North Carolina State University and a Master of Business Administration from National University.

Praise

In the announcement from Hertz, which is based in Estero, Florida, Stephen Scherr received praise.

Tom Wagner, Vice Chair of the Hertz Board of Directors, praised him.

In the announcement, the departing chief executive received no accolades for concrete and quantified financial successes, no explicit word of thanks, no word of regret and no good wishes.

In the announcement, Tom Wagner, Vice Chair of the Hertz Board of Directors, spoke about Gil West before turning to Stephen Scherr.

In the announcement, Colin Farmer, Lead Director of the Hertz Board of Directors, spoke about Gil West, but did not say a personal word about Stephen Scherr.

Gil West received advance praise.

“Appreciative”

Tom Wagner, Vice Chair of the Hertz Board of Directors, did not say many words regarding Stephen Scherr: “We are appreciative of Stephen’s contribution over the last two years, including on a number of key strategic initiatives, which Gil will now lead in their continued execution.”

“Thrilled”

Tom Wagner, Vice Chair of the Hertz Board of Directors, said, regarding Gil West: “We are thrilled to have Gil join Hertz as Chief Executive Officer. Gil’s experience as a successful leader in operationally intensive businesses will further strengthen the Company’s world class team of over 27,000 global employees who work tirelessly to deliver outstanding service to customers daily.”

“Orchestrating highly effective operational turnarounds”

Colin Farmer, Lead Director of the Hertz Board of Directors, said, regarding Gil West: “Gil’s success in leading over 70,000 people at Delta and orchestrating highly effective operational turnarounds will position him well to lead Hertz. He will be able to build upon the strategic projects begun during Stephen’s tenure, including improvements to technology, commercial partnerships and the revitalization of our value brands. Gil’s prior experience in transportation, travel and mobility will give him important perspective on how to thoughtfully lead Hertz into the future.”

“Salary at an annualized rate of $1,500,000”

Hertz stated in a regulatory filing published on March 18, 2024: “In connection with Mr. West’s appointment as Chief Executive Officer, the Company and Mr. West entered into an employment agreement (the “Employment Agreement”) providing the following compensation terms: (i) a salary at an annualized rate of $1,500,000, (ii) a target annual incentive bonus of no less than 150% of his base salary (the “Target Annual Bonus”) (with a guaranteed incentive bonus of no less than 112.5% of his base salary for 2024), (iii) a grant of restricted stock units (the “RSU Grant”) under the Company’s 2021 Omnibus Incentive Plan (the “Incentive Plan”) to be made promptly after, and vest ratably over three years from, his start date, (iv) a grant of performance stock units (the “PSU Grant,” and together with the RSU Grant, the “Sign-On Grants”) under the Incentive Plan to be made promptly after his start date and to be earned based on both his continued employment through each of the first three anniversaries of his start date and Company stock price achievement over five years from his start date, and (v) commencing in fiscal year 2026, eligibility to receive annual equity awards under the Incentive Plan (with his annual equity award for fiscal year 2026 expected to have an aggregate grant date fair market value of no less than $8,000,000). The Sign-On Grants represent Mr. West’s annual equity awards under the Incentive Plan for the 2024 and 2025 fiscal years and have a total grant date value of $33 million, with 45.45% of the total value attributable to the RSU Grant and 54.55% attributable to the PSU Grant. The number of shares underlying each of the RSU Grant and PSU Grant will be determined based on the weighted average closing price of the Company’s common stock for the 30-day period ending on March 15, 2024.

Pursuant to the Employment Agreement, upon a termination of Mr. West’s employment (i) by the Company without Cause (as defined in the Employment Agreement) or (ii) by Mr. West for Good Reason (as defined in the Employment Agreement), in each case, subject to Mr. West signing and not revoking a release of claims, Mr. West will be entitled to the following severance payments and benefits: (a) a cash severance payment equal to 2.0x the sum of Mr. West’s then-current base salary and Target Annual Bonus, paid in a lump sum by March 15 of the year following his termination; (b) a pro-rated annual incentive bonus for the year of Mr. West’s termination, based on the actual achievement of his applicable performance goals and payable by March 15 of the following year; and (c) payment or reimbursement for the balance of any COBRA premiums paid during Mr. West’s COBRA continuation coverage period, as further described in the Employment Agreement.

The Employment Agreement also provides that upon a Good Leaver Termination (as defined below) that does not occur in connection with a Change in Control (as defined in the Incentive Plan), Mr. West’s Sign-On Grants will be subject to the following treatment: (i) 12 months of additional time-vesting of any then-unvested portion of the RSU Grant and (ii) for any performance stock units subject to the PSU Grant (“PSUs”) that have time-vested but not performance-vested, such PSUs will remain outstanding and eligible to performance vest for 12 months following such termination. Upon a Good Leaver Termination following the occurrence of a Change in Control, any then-unvested portion of the RSU Grant will accelerate in full. Upon a Change in Control, any then-unvested PSUs will immediately satisfy the time-vesting requirement of the award and will vest with respect to the performance vesting component of the award solely based on the value of the Company’s stock price upon such Change in Control. For purposes of the Employment Agreement, a “Good Leaver Termination” means a termination of Mr. West’s employment due to Mr. West’s death or Disability (as defined in the Employment Agreement), by Mr. West with Good Reason or by the Company without Cause.

Pursuant to the Employment Agreement, Mr. West is also subject to certain restrictive covenants, including a perpetual confidentiality covenant and non-competition and non-solicitation covenants that extend for two years after termination of his employment.”

“Excited”

Gil West said: “I am excited to join Hertz and build on its extraordinary family of brands and global network. With a 106-year history, Hertz enjoys incredible brand strength and customer loyalty and I look forward to working with the team to achieve its potential for our customers, team members and shareholders.”

Hertz Global Holdings Inc. (HTZ): $2.3 billion market value

Hertz Global Holdings Inc. is listed on the Nasdaq in New York. The shares with the symbol “HTZ” had a market capitalization of around $2.3 billion (as of March 14, 2024). Hertz Global Holdings Inc. is a member of the Russell 1000 index. The stock belongs to the industrials sector.

The title of the announcement from Hertz is: “Hertz Announces Appointment of Gil West as Chief Executive Officer as Stephen Scherr Steps Down as CEO of the Company; Transportation veteran to focus on operationally-driven revenue and EBITDA growth.”

(Adds information from SEC filing published on March 18, 2024.)

exechange at a glance
Who leaves
Name Stephen M. Scherr
Age 58 years (on the date the company filed its latest proxy statement)
Position Chief Executive Officer
Company Hertz Global Holdings Inc.
Action “step down”
When March 31, 2024
Days remaining 16 days remaining
Reason no explicit reason given
Tenure two years and two months (as of March 31, 2024)
Push-out Score* 9 (on a scale of 0 to 10)
Forced/Voluntary** Forced (provisional assessment)
Future position
Who takes over
Name Wayne Gilbert (Gil) West
Age 63
Position Chief Executive Officer
Company Hertz Global Holdings Inc.
Previous position Chief Operating Officer
Previous company Delta Airlines and GM’s Cruise unit
When April 1, 2024
Announcement date March 15, 2024
*assessment by exechange; **according to the Simplified Push-out Algorithm