Gil Shwed, co-founder of Check Point (Nasdaq: CHKP), who announced yesterday that he would step down as CEO of the company and become executive chairman, is the longest serving CEO among Nasdaq-listed companies. He was in the role before Google existed, and a year before Amazon came on the scene. Even Amazon founder Jeff Bezos (the second longest serving CEO on the technology-weighted exchange) did not manage to overtake Shwed in that respect. Bezos is one of several founders and managers who have never abandoned their life’s work. He remains a very active executive chairman at Amazon, as Bill Gates was at Microsoft for years after he stopped being CEO. Unlike them, however, Shwed, at least until this week, remained a one-company, one-job person. He has not set up funds or other companies or developed other interests. For 31 years, Shwed has got up each morning and gone to work at Check Point.
He is known as a CEO who gets his hands dirty. He takes an interest in writing code, in the technology, and refuses to become an entrepreneur who has forgotten what a production line looks like. He acquired a reputation as an ascetic CEO, thorough, almost colorless (an image he tried to break by adopting hobbies such as disk-jockeying and cooking). Under him, since its IPO, Check Point has increased in value forty times over to its current market cap of $18.8 billion (making it the second most valuable Israeli company on Wall Street after Mobileye).
The timing of Shwed’s move is interesting. Check Point’s share price is near its all-time high. Shwed himself holds 23% of the company, a stake worth $4.7 billion. That makes him not just the largest shareholder, but also one of the wealthiest people in Israel. More than a decade ago, Shwed forewent a CEO’s salary. He is paid the minimum wage, and is chiefly compensated with options. That has given him control of the company and dilutes other investors, drawing criticism from some of them, but it also expresses great faith in the company and its stock.
Over the years, Shwed’s percentage stake in Check Point has risen, thanks to his annual stock-base compensation and to the fact that the company has carried out share buyback programs. From 2014 (the year in which the company became obliged to make the disclosure) to 2022, Shwed’s compensation cost (almost all stock-based) totaled $300 million.
Asked why he had decided to step down now, Shwed replied, "I’ve been asked for 27 years what my next step will be. I began the journey in February 1993, a long time ago. I was a young man of 24, and I’ve been through a great deal with Check Point. I think that now is the time, especially in the light of the last quarterly results. The timing is good when the company is on a positive trend, the results are amazing, and I feel confident in our products. Even the share price is at a peak."
Shwed said that he was switching to the chairperson’s role to focus on Check Point’s future and that of the cyber industry in general. "I want to focus on the next generation and less on daily activity, to deal with development of future technologies, and to understand from customers what they need," he said.
Does he intend to become more active in the public sphere, and perhaps even in politics? "Perhaps in the future I’ll have more time to engage in public activity," he replied, "but I’m not looking to go into politics or to express myself on political issues."
Who will be the next CEO?
From what Shwed had to say it emerges that no decision has been made about his replacement. "I hope that whoever is CEO will also be a person of vision," he said, adding that he did not intend to be an aggressive director. "We’ll work in partnership. I worked with partners in Check Point’s early days, and I know how to move through career stages and let people work."
Shwed added that it was important to him that the CEO should be someone who likes going out into the world and to customers, with a yen for cybersecurity, and experience in large enterprises. "As a company with its headquarters in Israel, we would want the CEO to be in Israel, and I hope Israeli," Shwed said, but he stressed that the search would be global. Candidates from within the company will also be considered, and Shwed estimated that the process would take between six months and two years. "After it’s completed, I’ll switch to the chairperson’s role," he said.
Probably unlike Shwed
Unlike his colleagues, Shwed does not make substantial investments in other cybersecurity companies, does not invest in venture capital funds, and has certainly never founded a cyber company outside Check Point. To understand how unusual that is in his landscape, you only need to look around.
The local cybersecurity sector is small and intimate, and almost every successful CEO in it has at least one exit behind them, and has investments in many startup companies and venture capital funds alongside their management role.
Shlomo Kramer, for example, Shwed’s partner in founding Check Point, has founded three other companies that he has also managed, floated another company, and altogether made 62 investments, many of which have resulted in exits.
Shwed, by contrast, put all his eggs in the Check Point basket. He has maintained steady growth in the company’s revenue and profits. He is a fanatic for growth and constant improvement in performance. On the other hand, he has become stuck with a conservative image. Check Point has developed new products and made acquisitions, but has remained a major player in network security. It has not invented new markets or managed to lead other segments that have grown up in the cybersecurity sector over the years.
In the 31 years of its existence, Check Point has made 24 acquisitions, most of them small. Palo Alto Networks, the company’s major US rival, founded by one of Check Point’s first employees, Nir Zuk, twelve years after it, has made 27 acquisitions. Nevertheless, Check Point has been one of the most profitable listed companies over time. It has preserved its Israeli identity and it has spawned the Israeli cyber industry.
That can’t be taken away from Shwed. It’s hard to find managers like him in the cyber industry, and so Check Point’s next CEO will probably bear little or no resemblance to him.
Published by Globes, Israel business news - en.globes.co.il - on February 7, 2024.
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