Edward Tilly, the chairman and CEO of the Chicago trading exchange Cboe, has resigned following an investigation into his undisclosed personal relationships with colleagues. This surprising announcement comes after Tilly’s successful tenure at Cboe, where he had risen through the ranks to become the head of the options exchange in 2013. Unfortunately, he is now the latest CEO to be toppled by allegations of inappropriate personal relationships at work.
The Cboe has wasted no time in naming a replacement for Tilly. Fredric Tomczyk, a board member and former president and CEO of TD Ameritrade, will take over the role immediately, according to a company news release. The decision to replace Tilly stems from an investigation launched by the board and outside counsel in late August. The investigation concluded that Tilly had violated company policies by failing to disclose these personal relationships with colleagues. As a result, Tilly agreed to resign “without good reason,” receiving his prorated salary and benefits through the termination date but forfeiting all unvested equity incentives, as stated in a letter filed with the Securities and Exchange Commission.
To ensure a smooth transition, William Farrow, a Cboe board member, has been appointed as the non-executive chairman, taking over from Tilly. In the news release, Farrow emphasized the company’s commitment to upholding the highest ethical standards and stated that Tomczyk’s familiarity with Cboe’s business and extensive experience in the financial services industry would provide stability during this transition period.
As expected, Cboe has not provided any details about the investigation. Tilly has also agreed not to make any statements regarding the investigation, resignation, or agreement with the company, as stated in his signed resignation letter. Efforts to reach Tilly for comment have been unsuccessful.
Tilly’s tenure at Cboe began on the trading floor in 1987, and he steadily climbed the ranks until he became CEO in 2013, succeeding the exchange’s longtime leader, William Brodsky. In 2016, Tilly also took on the role of chairman when Brodsky stepped down. His departure will undoubtedly bring significant change to the organization.
According to SEC filings, Tilly was set to receive significant compensation as part of his employment agreement until February 2023. This included an annual base salary of nearly $1.27 million, a target bonus of approximately $2.1 million in cash, and $6.65 million in equity incentive compensation for this year. However, he will only receive a prorated salary and equity incentives until his resignation date, forfeiting millions in unvested equity incentives.
Fredric Tomczyk, the newly appointed CEO, retired from TD Ameritrade in 2016 after serving as the president and CEO for eight years. He joined the Cboe board in 2019. As CEO, Tomczyk will receive an annual base salary of $1 million, with a target bonus of $1.65 million, both prorated for 2023. He will also receive an equity incentive award of $7.15 million vesting in three annual installments, contingent on his serving as CEO for at least one year and continuing to serve on the board.
Cboe, originally known as the Chicago Board Options Exchange, launched in 1973 and became a publicly traded company in 2010. Over the years, it grew into one of the world’s largest options exchanges and became a vital part of securities trading worldwide. The company is widely recognized for its flagship product, the CBOE Volatility Index (VIX), which measures the expected movement of the broader stock market.
In response to his appointment, Fredric Tomczyk expressed his confidence in the Cboe team and emphasized his excitement to work together in building trusted markets worldwide. However, this situation once again highlights the issue of high-profile CEOs being forced to resign due to inappropriate personal relationships with colleagues.
This resignation follows similar controversies involving CEOs in recent years. In 2019, McDonald’s fired CEO Steve Easterbrook after he admitted to engaging in a consensual relationship with an employee and exchanging sexually explicit videos and text messages, violating company policy. Easterbrook paid back over $105 million in equity awards and cash as part of a settlement with McDonald’s. In 2022, Jeff Zucker was ousted as CEO of CNN after the disclosure of a consensual relationship with a colleague. His successor, Chris Licht, was subsequently fired in June due to low ratings and programming missteps. Last week, Bernard Looney resigned as CEO of BP after an investigation revealed that he had not been fully transparent about alleged personal relationships with colleagues.
The swift action taken by the Cboe board highlights the company’s commitment to upholding ethical standards and ensuring accountability. The appointment of Fredric Tomczyk as the new CEO brings his extensive experience in the financial services industry to the table and is anticipated to provide stability during this transitional period. It remains to be seen how Cboe will evolve under Tomczyk’s leadership and how the company will address future challenges and opportunities in the dynamic trading industry.