Australia has a high CEO turnover

PWC recently published a report titled 15th annual CEO succession study: The value of getting CEO succession right, in which they examine CEO succession trends at the 2,500 largest public companies in the world.

With regards to Australia, some of their findings include:

  • In 2014, Australia had 35% more CEO turnovers in leading companies than did turnovers on a global scale
  • Australian CEO turnovers result in a shareholder loss of approximately AU$8 billion
  • In comparison to planned CEO successions, forced CEO turnovers lead to significantly more shareholder loss
  • The age of incoming CEO’s at Australian companies is one of the youngest worldwide, with a median age of 51 years old
  • The proportion of females amongst incoming CEO’s is one of the highest worldwide

Perhaps it is a cultural attribute in a country with a high Prime Ministerial turnover rate.

In comparison to other companies across the globe, of whose turnovers are planned 86% of the time, Australian companies experience planned turnovers in only 77% of cases.

However, there are likely to be many factors at play. One of these is governance practice. For example, the US has one of the lowest CEO turnover rates in the OECD. Its listed company boards are usually dominated by an executive chairman and the “independent” non-executive directors nominated by the CEO-led board, who do not need more than 50% shareholder support to get elected. Australia, in contrast, has separate board chairman and CEO roles, and boards have directors that must be elected by a majority vote. And, over the past 25 years the returns of ASX listed companies have been higher, and volatility lower, than US listed companies.

The study indicates that high-performing companies are more apt to hire their CEO from inside the company than are other companies, and they follow one insider CEO with another one 82% of the time, 9% points more often than low-performing companies.

As one function of the board is to hire and fire the CEO, it follows that:

  • Company boards must create and formalise a precise CEO succession plan
  • Company boards must focus on developing and managing talent of company employees

Implicit in these points is the need to increase the pipeline by considering successors from more diverse backgrounds.

See the report HERE.

© Guerdon Associates 2024
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