Carnival’s announcement Tuesday that Arnold Donald would step down as CEO of the world’s largest cruise line came after some investors at a shareholder meeting earlier this month pushed back on metrics related to the 67-year-old’s $15 million 2021 compensation package -Dollars were linked, as sources are aware of the situation, told CNBC.
“End of an era,” said one investor who declined to be named. The company could not be reached to respond to a request for comment.
Donald – who will become vice chairman effective August 1 – took the helm as chief executive nine years ago, two of which were spent keeping Carnival afloat during the Covid-19 pandemic by shedding debt and stock in raised billions.
While Donald undoubtedly played a leading role in reviving the cruise industry from the depths of the pandemic, Carnival’s stock has struggled to keep up with peers like Royal Caribbean, which saw industry veteran Richard Fain step down as CEO about four months ago after more than 33 years. The 72-year-old remains chairman.
Carnival’s stock is down nearly 13% in 2022, just more than the S&P 500’s 11.5% drop in the same period year-to-date, and it’s down more than 35% over the trailing 12 months. By contrast, shares of Royal Caribbean are up nearly 3% for the year and down only about 9% over the trailing 12 months.
The leadership changes at Carnival and Royal Caribbean will see a new guard stepping in to guide the cruise giants through their next stages of recovery. At Carnival, current COO Josh Weinstein, 48, has been selected as the new CEO. Former CFO Jason Liberty, 46, stepped into the top position at Royal Caribbean earlier this year.
“Change can be a good thing,” Stifel analyst Steven Wieczynski wrote in a recent note to clients.
In the coming weeks, Weinstein shareholders, who has been with Carnival for 20 years, will want to hear about his game plan for the cruise line and how it might differ from Donald’s approach.
“He’s younger, he should bring new energy,” Wieczynski told CNBC.
Arnold Donald, CNBC, Carnival Corp.
Scott Mlyn | CNBC
As head of the world’s largest cruise line, Donald quickly became the face of the industry at the height of the pandemic, when scores of ships with Covid-infected guests and crew were stranded for days.
As the Centers for Disease Control and Prevention struggled hard to uphold their no-sail order, Donald played a leading role in facilitating discussions with lawmakers, industry leaders, and the White House to change the course of that order.
As the economy began to recover in 2021, the outlook for cruises remained bleak. But Donald, one of the few black CEOs on Wall Street, remained defiantly optimistic about the industry.
At CNBC’s Evolve Global Summit last summer, Donald was asked if he’d ever doubted Carnival’s ability to weather the storm. He said at the time, “I never doubted we would make it, but … it was excruciating.”
At the time of Seatrade’s annual conference in fall 2021, Carnival ships were slowly returning to sea after a 15-month suspension. “We know where the road is leading, and the path leads to a very bright future,” Donald said during a panel discussion at the event. Fain, then CEO of Royal Caribbean, was also on the podium and expressed similar optimism.
The pandemic wasn’t Donald’s first crisis. He joined Carnival in 2013, the year a fire knocked out power to the Carnival Triumph’s plumbing system and left more than 4,200 passengers and crew stranded at sea in appalling conditions for days. Last year, one of Carnival’s ships, the Costa Concordia, capsized off the coast of Italy, killing 32 people.
During Donald’s five-year tenure as CEO, Carnival’s stock price has nearly doubled, hitting an all-time high of $72.70 per share in January 2018. Since then, shares have declined in part due to the pandemic and are trading at $17.41 per share as of Wednesday’s close.
However, cruise demand is rebounding after Carnival revealed three weeks ago that it had enjoyed a record week of bookings in the company’s history.
“Cruise demand is very strong in the second half of this year and into 2023. Those who haven’t cruised in two years are ready to go,” Wieczynski said.
New data from trade group Cruise Lines International Association also shows that people’s intention to cruise is now exceeding pre-pandemic levels.
As bookings rebound, Carnival has brought back nearly 75% of its ships while giving up older, less fuel-efficient ships.
Analysts and investors are waiting to see when the cruise lines will generate positive cash flow. Carnival and Royal Caribbean executives have said that would happen sometime in the next few months.