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Thursday, January 14, 2010

CEO Changes

Here is an interesting article from yesterday's Los Angeles Times:

'The nation’s companies reported that 1,227 chief executives vacated their posts during 2009, the lowest level in five years, according to a survey today.

Last year’s total was 17% less than the record 1,482 departures of 2008 and the smallest annual number since the 663 chief executives who left in 2004, according to Chicago outplacement firm Challenger, Gray & Christmas Inc.

The year featured several notable departures, such as Bank of America’s Ken Lewis, who retired. General Motors’ Rick Wagoner, who was ousted in March, was followed out shortly thereafter by his successor, government-appointed Fritz Henderson, in December.

Challenger Chief Executive John Challenger noted that the decline in departures could be a result of companies trying to maintain a stable upper management until the economy settles down and begins growing.

“If and when it appears that the expansion is finally underway, there could be a surge in leadership changes, with companies opting for growth-oriented risk-takers over the ‘just-keep-the-ship-afloat’ leaders they favored in the latter half of the recession,” he said.

Last month, 105 chief executives left their positions, up from the 94 who vacated in November but less than the 123 who left in December 2008. The 78 chief executives who left in May was the lowest monthly total since December 2004, when 56 departed.

The healthcare industry recorded the highest turnover for the fifth consecutive year, with 203 departures, down from 285 in 2008, Challenger said.

The government and nonprofit sector was next, with 163 departures, followed by the 123 in the financial industry.

As for their reasons for leaving, 355 chief executives cited resignation, while 251 retired. Only 15 were fired by their companies, and seven were removed due to underperformance.

And 231 chief executives, such as Morgan Stanley’s John Mack, said they left their posts but stayed with the company as a member or chairman or in some other senior executive post. But 144 left after being enticed by new positions in other firms.

The typical chief executive departing last month was 58 years old and had served for just over 8 years.'

The New Breed of CEO

In May 2009, PepsiCo CEO Indra Nooyi made a profound speech about the new breed of CEO's we now need and their responsibility to society:

'I think we need to embed a culture of long-term thinking. If that is right, then the job of the CEO is going to be very different in the future from the way in which the job has developed over the past 2 or 3 decades. The CEO we have tended to admire has been the one who could take the costs out, the one who could get the biggest return in the shortest possible time. That was what the idea of the company as an engine of short-term value required. But that kind of hard-edged leader delivering a return on capital no matter what the emotional social cost, I believe, is yesterday’s leader....

....So we need a new breed of CEO better equipped for the job they will now do than the job they did years ago....perhaps the most important thing is that the new CEO has to create sustainable value.'

For the full speech, see - http://www.pepsico.com/Download/IKN_Economic_Club.pdf