Bulletin
Investor Alert

General News Archives | Email alerts

July 28, 2020, 9:55 a.m. EDT

Investors are forcing companies to strengthen their top teams amid coronavirus uncertainty, leading to record boardroom change

The average tenure of outgoing lead executives was slightly less than seven years

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    Royal Mail PLC (RMG)
  • X
    Coty Inc. Cl A (COTY)

or Cancel Already have a watchlist? Log In

By Lina Saigol and David Ricketts


iStockphoto
Revolving doors are spinning as boards seek level heads during the COVID crisis.

Companies worldwide have been in lockdown for the past four months, leaving banks of desks empty while staff work remotely. But one area has seen a flurry of activity: The corner office.

This year has seen a spate of changes in boardrooms worldwide, as companies come under pressure from investors to shuffle their executive teams to steer them through the coronavirus crisis.

The trend is most pronounced in the U.S., where companies have experienced higher levels of executive departures than their counterparts in both the U.K. and Europe, according to new research.

SquareWell, a shareholder advisory firm, tracked changes across companies listed on the major European, U.K., and U.S. indexes over the period January 1 2019 to June 30 2020.

It found that 66% of those executives quit, while just 7% were formally dismissed from their posts. Almost a third (29%) were ousted from their roles because of poor performance, a scandal or strategic disagreement.

Read: CEO exodus hits record as BHP boss jumps ship

Analysts, headhunters and investors have highlighted several reasons for this, including pressure from shareholders frustrated with underperformance and the need for better governance during the crisis, while other departures have taken place as executives reach the end of their tenures.

“These are truly unprecedented times with the stress of a more typical economic and debt cycle being amplified by an extraordinary global pandemic, the structural impact of major disruption across industries and ever increasing hyperconnectivity,” said Susie Cummings, founder of Nurole, the global headhunting platform.

Cummings added that the resulting surfeit of data and shortage of patience is making shareholders more demanding and fueling executive burnout faster.

Read: Boardroom shuffles become latest coping mechanism for companies battling COVID-19 fallout

Some departures have been accelerated by the pandemic. In May, Royal Mail /zigman2/quotes/204213037/delayed UK:RMG +0.42%  abruptly replaced CEO Rico Back after less than two years in the job, after clashes with unions over a £1.8 billion restructuring plan aimed at turning around the struggling postal delivery company.

SquareWell’s report showed that 40% of those executives dismissed during the period had recorded negative share price performance during their tenure. Under Back’s leadership, for example, shares in Royal Mail /zigman2/quotes/204213037/delayed UK:RMG +0.42%  fell to their lowest level since the business was privatized with a market value of £3.3 billion. At close of trading in London on Friday, the business was valued at £1.8 billion.

In July, cosmetics maker Coty /zigman2/quotes/208645074/composite COTY -2.53%  named former L’Oréal executive Sue Nabi as CEO — its fourth boss in four years. Coty’s shares have lost more than 60% in value this year.

Some companies have changed power-sharing agreements to allow for clear decision-making during the crisis. In April, Europe’s largest software group SAP /zigman2/quotes/203458330/delayed DE:SAP -1.64%  said it had abandoned its dual-chief-executive structure to provide clarity in the face of business challenges posed by the COVID-19 pandemic. Co-CEO Jennifer Morgan, who was appointed to the role alongside Christian Klein in October 2019, left the company at the end of April. Morgan was the first female CEO of Germany’s blue-chip DAX index.

Russ Mould, investment director at AJ Bell, said the figure for CEO turnover is the highest this century and beats the peak of 17 seen in 2007 and 2013 (16 changed in 2000), while 18 CFO changes trails 2014, among the past two decades.

However, he noted that the pace of change in the FTSE 100, and seemingly the U.S., appears to have slowed during the pandemic. “Investors will be looking for executives to show that shareholders and stakeholders ‘are all in this together’ and having someone walk out on you during a time of great uncertainty — when experience, steady hands and cool heads are needed — would be far from ideal,” Mould said.

He noted that Willie Walsh had deferred his retirement from British Airways’ owner IAG /zigman2/quotes/208070069/delayed UK:IAG -0.63%  by a few months, to help as it struggles to cope with the unprecedented travel slump.

Only 12% of those landing CEO jobs have similar experience at other listed companies, according to SquareWell. These include Björn Rosengren, who joined Swiss manufacturer ABB /zigman2/quotes/201477239/delayed CH:ABBN +0.17% in February, having been CEO at Swedish metal-cutting tools maker Sandvik /zigman2/quotes/201139080/delayed SE:SAND -3.04% . Wells Fargo /zigman2/quotes/203790192/composite WFC +1.37% , the U.S. banking giant, opted for Charles Scharf as its CEO in September 2019, given his prior experience at the helm of BNY Mellon /zigman2/quotes/200171276/composite BK +0.78% .

The majority (38%) of CEOs appointed were heads of divisions or regions in their previous companies, according to SquareWell.

Read: Activists Can Push Board Diversity Because Institutions Are Listening

The report shows women are entering the boardroom at a higher rate than those leaving, accounting for 11% of new top executive appointments since 1 January 2019, compared with 4% of those exiting.

Women who have landed executive leadership positions are more likely to have been sourced from outside an organization, according to SquareWell.

Solvay /zigman2/quotes/201117581/delayed AT:SOLB -0.79% , the Belgian chemicals company, appointed Ilham Kadri as its CEO in March 2019, poaching the French-Moroccan from Diversey, a hygiene and cleaning products specialist, while Swedish communications firm Telia Company /zigman2/quotes/208009172/delayed SE:TELIA -0.76%  hired Allison Kirkby as its CEO from Danish rival TDC Group.

/zigman2/quotes/204213037/delayed
UK : U.K.: London
241.00 p
+1.00 +0.42%
Volume: 1.76M
Sept. 25, 2020 4:35p
P/E Ratio
14.98
Dividend Yield
0.00%
Market Cap
£2.40 billion
Rev. per Employee
£63,484
loading...
/zigman2/quotes/204213037/delayed
UK : U.K.: London
241.00 p
+1.00 +0.42%
Volume: 1.76M
Sept. 25, 2020 4:35p
P/E Ratio
14.98
Dividend Yield
0.00%
Market Cap
£2.40 billion
Rev. per Employee
£63,484
loading...
/zigman2/quotes/208645074/composite
US : U.S.: NYSE
$ 2.70
-0.07 -2.53%
Volume: 13.44M
Sept. 25, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$2.12 billion
Rev. per Employee
$453,290
loading...
/zigman2/quotes/203458330/delayed
DE : Germany: Frankfurt
129.68
-2.16 -1.64%
Volume: 3,786
Sept. 25, 2020 8:58p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
N/A
Rev. per Employee
€256,047
loading...
/zigman2/quotes/208070069/delayed
UK : U.K.: London
94.64 p
-0.60 -0.63%
Volume: 56.22M
Sept. 25, 2020 4:35p
P/E Ratio
N/A
Dividend Yield
11.36%
Market Cap
£4.73 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/201477239/delayed
CH : Switzerland: SWX
CHF 23.16
+0.04 +0.17%
Volume: 6.95M
Sept. 25, 2020 5:30p
P/E Ratio
32.97
Dividend Yield
3.45%
Market Cap
CHF49.35 billion
Rev. per Employee
CHF201,286
loading...
/zigman2/quotes/201139080/delayed
SE : Sweden: Stockholm
kr 167.70
-5.25 -3.04%
Volume: 6.78M
Sept. 25, 2020 5:29p
P/E Ratio
43.64
Dividend Yield
0.00%
Market Cap
kr216.95 billion
Rev. per Employee
kr2.40M
loading...
/zigman2/quotes/203790192/composite
US : U.S.: NYSE
$ 23.64
+0.32 +1.37%
Volume: 30.23M
Sept. 25, 2020 4:02p
P/E Ratio
27.02
Dividend Yield
1.69%
Market Cap
$96.08 billion
Rev. per Employee
$392,114
loading...
/zigman2/quotes/200171276/composite
US : U.S.: NYSE
$ 33.40
+0.26 +0.78%
Volume: 3.46M
Sept. 25, 2020 4:02p
P/E Ratio
7.20
Dividend Yield
3.71%
Market Cap
$29.36 billion
Rev. per Employee
$374,016
loading...
/zigman2/quotes/201117581/delayed
AT : Austria: Vienna
73.12
-0.58 -0.79%
Volume: 557.00
Sept. 25, 2020 5:32p
P/E Ratio
N/A
Dividend Yield
3.59%
Market Cap
€8.32 billion
Rev. per Employee
€461,957
loading...
/zigman2/quotes/208009172/delayed
SE : Sweden: Stockholm
kr 35.33
-0.27 -0.76%
Volume: 11.18M
Sept. 25, 2020 5:29p
P/E Ratio
50.13
Dividend Yield
5.09%
Market Cap
kr145.59 billion
Rev. per Employee
kr3.51M
loading...

This Story has 0 Comments
Be the first to comment
More News In
Industries

Story Conversation

Commenting FAQs »
Link to MarketWatch's Slice.