How long should a CEO stay at the helm?
The issue is topical once again following the collapse of African Bank and the departure of its charismatic, influential and dogmatic CEO Leon Kirkinis after 21 years at the helm.
His fall from CEO superhero status was as dramatic as it was quick. Two years ago, he could do no wrong: he was CEO of a R30bn Top 40 listed company. Today, the business is in curatorship, and Kirkinis is out of the company he founded.
It is a warning to CEOs not to overstay their welcome. So just how long should a CEO stay, particularly if the business is performing well?
American CEOs are sticking to their jobs longer. According to The Conference Board, the average tenure of a Fortune 500 company CEO is 9.7 years. It’s the longest average CEO tenure in more than a decade.
Harvard researchers studied 356 US companies, calculating the ideal tenure for a CEO: 4.8 years. That might prove a ludicrously short time in South Africa where we have a dearth of skills. It is also around the five-year mark, where many CEOs are only just putting their own stamp on the business, having in many cases just disentangled themselves from their predecessor’s mess.
The researchers say: “A CEO takes office, begins gaining knowledge and experience, and is soon launching initiatives that boost the bottom line. Fast-forward a decade, and the same executive is risk-averse and slow to adapt to change — and the company’s performance is on the decline.”
The past five years have seen significant CEO churn in South Africa. Leadership in the listed property sector has barely shifted in recent years, but there has been wholesale change in construction. Only a handful served in the top jobs for more than a decade. A surprising number are accountants who founded the businesses they still run.
Following the African Bank debacle, should CEOs have a “best before date” stamped on their foreheads?
Is it something that played on Grant Pattisson’s mind. Like his Massmart predecessor, Mark Lamberti, he wants more than one CEO job in his career. Pattison quit Massmart while he was ahead. Lamberti is onto his third CEO job at Imperial.
Would it be in an investor’s best interests for CEO terms to be limited? What would have happened to the fortunes of Bidvest, Shoprite, Investec, Aspen and Steinhoff had their CEOs left after 10 years?
Even now, how comfortable are shareholders that any of those businesses have successors in the wings who can deliver the same sorts of returns?
At 68, CA-trained Whitey Basson is by far the country’s longest-serving CEO. He and chairman Christo Wiese worked together for decades, first at Pep and since 1979 when Shoprite was launched.
Brian Joffe founded Bidvest in 1998. At 65 he is still going strong, while Aspen CEO Stephen Saad has run the Durban business since 1999, transforming it into a global drugs manufacturer and distributor.
Markus Jooste became MD of Steinhoff in 2000. Through Conforama he oversees the second-biggest furniture retailer in Europe after Ikea.
And would you want to replace Discovery founder Adrian Gore, who has been at the helm for 21 years and shows no signs of flagging. Stephen Koseff has run Investec since long before the dotcom bubble burst. Its share price has fluctuated wildly along with global financial markets as Koseff refined the risk model and the group’s entrepreneurial spirit.
The market’s most unlikely capitalist duo, Johnny Copelyn and Marcel Golding, have been at the HCI helm since 1997.
The moral of the story: if you want your kids to have long illustrious business careers, ensure they study accounting and start their own businesses.
by Bruce Whitfield: Award-winning financial journalist and broadcaster.
IMAGE CREDITS: http://office-turn.com/