Should senior executives get nervous when an external CEO arrives?



History suggests that under a Private Equity owned structure as well as in a publicly listed environment C-suite level executives in underperforming companies or companies experiencing significant transformation due to M&A are often under the spotlight when a new CEO is appointed. The shake-ups and removals of c-suite level talent are generally more savage when a new boss arrives from outside.

From my experience appointing CFO’s and CEO’s in both PE backed and ASX listed companies, an externally appointed CEO will in some cases bring their own CFO and other c-suite level executives into the business. There are many current examples of this in the March quarter 2016. I believe that with greater media scrutiny on company share price performance in conjunction with executive remuneration and alignment to meeting satisfactory shareholder returns, the pressure is intense for the top executives as well as for the Board. We all know well that the share market can be brutal when the company misses its earnings guidance for half year and full year reporting. Some may suggest that by removing a CEO or CFO as a scapegoat to restore investor credibility is the best option.

However, there is evidence to suggest there is some hope that the churn rate of Australian CEOs may be set to improve in coming years. According to Strategy &, leading Australian companies saw 42 CEO turnovers in 2014 – almost 35 percent more CEO turnover events relative to leading global enterprises. Whilst Australian companies have shown an improvement in the ability to plan succession for the top job against the long run Australian average, Australian boards are still being forced into CEO-separation more than global boards.

The incoming class of CEOs in top Australian companies in recent years was amongst the youngest globally, with a median age of 51. They were also represented by the most regionally diverse set of leaders, more consistently engaged from outside of Australia, than leaders appointed into top global firms. The incoming class also consisted of the greatest proportion of females globally.

No doubt there will be continued churn in corporate Australia in 2016 which will only create exceptional career opportunities for those senior executives that are patient and prepared to back themselves by taking on challenges and getting out of their comfort zone. Managing your career on your terms is far more attractive than being pushed!

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Foley Durham are specialists in optimising the composition of C-suite executive teams, boards and organisations.

Foley Durham has superior strategic insights into the talent acquisition challenges facing specific market segments - enabling us to identify senior talent leaders that will fit each of our client’s unique strategic goals. 

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