One way or another, the dreadful COVID-19, it can be said, has affected most people from households to the place of employment. The pandemic-driven upheaval across global offices has gone all the way to the top, with a record number of chief executive changes at FTSE 100 firms already this year.
Companies, under increased pressure from investors, are shuffling their executive teams like never before, in the hope they can better steer them through the crisis. Investment director at AJ Bell, Russ Mould, said the FTSE 100’s figure for CEO turnover this year — 18 changes already made or announced — is the highest this century, beating the previous peaks of 17 a year, seen in both 2007 and 2013.
Meanwhile, the 18 changes of chief financial officer, according to figures for the first half of this year, is second only to 2014, when 19 finance chiefs at UK blue-chips were replaced.
Mould thinks, however, the pace of change in the FTSE 100, and apparently, the US, seemed to have slowed as the pandemic has worn on.
He said: “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.”
SquareWell, a shareholder advisory company, tracked changes across “close to 500” companies listed on the major European, UK and US indexes over a period of 18 months from January 1, 2019, to June 30, 2020.
It found that, while just 7 per cent of executives were formally dismissed, almost a third (29 per cent) were ousted from their roles because of poor performance, a scandal or strategic disagreement.
The remaining 66 per cent of executives quit.
The trend, according to financial news, is most pronounced in America, where firms have experienced higher levels of departures from the C-Suite (highest-ranking executives) than their counterparts in both the UK and Europe, the research found.
Analysts, employment agencies and investors have highlighted several reasons for the turnover, 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 tenure.
Some departures have been accelerated by the pandemic. For instance, in May, Royal Mail 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 UK postal delivery company.
Buck was also criticised for remaining in his country of residence, Switzerland, during the pandemic. SquareWell’s report showed that 40 per cent of those executives dismissed during the period had recorded negative share price performance during their tenure. Some companies have changed power-sharing agreements to allow for clearer decision-making during the crisis.
For instance, Europe’s largest software group SAP abandoned its dual-CEO structure to provide clarity in the face of business challenges posed by COVID-19. It meant co-CEO Jennifer Morgan, who was appointed to the role alongside Christian Klein in October 2019, left at the end of April, while Europe was in the grip of coronavirus.
However, SquareWell’s report noted that for some companies, continuity was key: “Faced with difficult economic times, many boards put business continuity first and shun a leadership change for fear of destabilising the company.
CEO transactions tend to fall to their lowest level in the year after a recession hits bottom. This trend is most pronounced in America and Europe, but it also held true in Asia during the recent crisis.” (The writer is our foreign correspondent based in the UK)
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