Boards of mature companies struggling to generate growth are showing less patience with mediocre CEOs
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By Lauren Silva Laughlin
DALLAS (Reuters Breakingviews) - Company bosses' shelf lives are getting shorter. Thomas Falk is stepping down as chief executive at Kimberly-Clark after 16 years, following in the recent footsteps of longstanding bosses at PepsiCo and Campbell Soup. It’s a sign of accelerating executive turnover at consumer-goods and industrial companies.
Falk joined the US$37-billion maker of Kleenex tissues and Huggies diapers in 1983 and took over as CEO some 19 years later. Since then, the company’s stock has returned a little less than eight per cent on average to shareholders. That’s nearly two percentage points less than the S&P 500 and more than a point less than consumer-staples companies on average.
Although the company exceeded analysts’ expectations with its latest quarterly earnings on Monday, a fresh warning about the negative impact of currency fluctuations and commodity prices knocked its stock price.
Falk isn’t nearly the longest-serving incumbent boss at a publicly traded U.S. company. Leslie Wexner holds that honour, acting as CEO of L Brands for more than five decades, even though the stock has tumbled some 70 per cent since 2015.
Tenures, though, are usually about a tenth that long, and reigns are shortening, especially in the consumer-goods and industrial sectors. Between 2015 and 2017, the average chieftain’s tenure in the former category has fallen by nearly a year, to five years; for the latter, it has fallen by a year and a half, to just under five and a half years, according to Equilar.
Boards of mature companies struggling to generate growth are showing less patience with mediocre CEOs. John Flannery lasted barely a year at General Electric before he was turfed out earlier this month. The August announcement that Indra Nooyi would step down after a dozen years at PepsiCo showed that even revered bosses aren’t sacrosanct. As successors including Falk’s heir Michael Hsu will find, leaders of challenged companies can expect a shorter leash.
