The Diversity Imperative: 14th Annual Australian Chief Executive Study
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This report provides insight into the 2013 Australian Chief Executive Study findings, compares the results to the global market and identifies trends. Our analysis looks at trends relating to performance and tenure; reasons for CEO turnover; and the number of insider appointments versus outsider appointments.
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The Diversity Imperative: 14th Annual Australian Chief Executive Study
- 1. The Diversity Imperative 14th Annual Australian Chief Executive Study
- 2. The Strategy& Australian CEO Study analyses trends in Australian CEO succession Strategy& • Annual study: we now have 14 years of continuous data on CEO successions in: – the world’s largest 2,500 listed companies – ASX 200 companies (listed throughout the course of the study since 2000 = 304 companies) • Strategy& is one of the authoritative sources on CEO successions for Tier 1 media • The study is evolving to have more commercial impact with CEOs and boards • This year’s study looks at trends in CEO successions across regions, industries, insiders/outsiders (among other analyses)… • … and looks in-depth at women CEOs of the last ten years • A related s+b package will explore the evolution of CEOs over 100 years and the background and skills we think CEOs will have in 2040
- 3. The 2013 study looks at turnover, performance and gender 1 2 Strategy& CEO turnover is up and continues to exceed global levels Tenure has flattened and remains questionably low Top performing companies are planning turnover and drawing from within Insiders are still on the rise and continue to perform better Male CEOs dominate and female retention is in decline 3 4 5 Australian women are forced out more often than male peers – a consistent global trend 6
- 4. In 2013 Australian CEO turnover rose and exceeded the global average for the 7th successive year Global and Australia1) CEO Turnover Rate 2000-2013 25% 20% 15% 10% 5% 11.3 Strategy& 15.2 15.0 14.4 14.2 13.1 11.6 15.6 14.4 14.3 18.0 13.8 14.4 15.4 14.7 10.8 10.9 12.9 16.4 23.1 22.3 13.4 11.5 14.2 12.6 12.1 11.3 0% 9.8 Global Australia 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Strategy& 2013 Chief Executive Study analysis. 1) “Australia” sample includes companies in the ASX200
- 5. This increase in Australia was driven by higher levels of planned and forced turnover Australian CEO succession reasons as a percentage of turnover events 2000-2013 Australian CEO turnover events as a percentage of turnover events 25 26 27 28 26 31 30 41 50 35 33 58 42 50 60% Source: Strategy& 2013 Chief Executive Study analysis Strategy& 42% 52% 57% 54% 65% 57% 59% 44% 54% 67% 41% 60% 68% 16% 38% 26% 29% 19% 19% 27% 12% 40% 17% 18% 21% 12% 24% 24% 19% 22% 14% 27% 16% 17% 29% 16% 29% 15% 38% 29% 8% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 M&A Forced Planned
- 6. Top performing Australian companies plan CEO succession and replace from within Australia incoming CEOs by insider versus outsider status; Australia outgoing CEOs by forced versus planned turnover and annualised shareholder returns1) 2009-2013 Outsider 27% 73% 78% 22% 40% 60% 33% 67% 25% 75% 50% 50% 52% 48% 50% 50% 44% 56% 24% 76% 56% 44% 44% 56% 1) Total shareholder returns are annualised over outgoing CEOs' tenure. Note: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete turnover information. Source: Strategy& 2013 Chief Executive Study analysis Strategy& Outgoing Planned 78.6% Outgoing Forced 21.4% Incoming Total 100% Outgoing Planned 90% Outgoing Forced 10% Incoming Total 100% Outgoing Planned 67.6% Outgoing Forced 32.4% Incoming Total 100% Outgoing Planned 61% Outgoing Forced 39% Incoming Total 100% Insider Bottom quartile Third quartile Second quartile Top quartile
- 7. However, overall forced turnover in Australia is higher than globally Australia and global outgoing CEOs by forced versus planned turnover and annualised shareholder returns1) 2009-2013 56% 44% Outsider 35% 65% 78% 22% 38% 62% 25% 75% 23% 77% 50% 50% 73% 1) Total shareholder returns are annualized over outgoing CEOs' tenure. Note: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete turnover information. Source: Strategy& 2013 Chief Executive Study analysis Strategy& 27% Australian Outgoing Forced 39% Global Outgoing Forced 14% Australian Outgoing Forced 21.4% Global Outgoing Forced 11% Australian Outgoing Forced 10% Global Outgoing Forced 19% Australian Outgoing Forced 32.4% Global Outgoing Forced 32% Insider Bottom quartile Third quartile Second quartile Top quartile
- 8. Australian CEO tenure was constant in 2013 and remained below global levels Outgoing CEO Median Tenure (Years in Office) 2006-2013 5.0 5.7 Global Median Years Note: Exhibit excludes turnover events resulting from M&A and interims for incoming CEOs and events with incomplete turnover information for incoming or outgoing CEOs. Source: Strategy& 2009-2013 Chief Executive Study analysis Strategy& 4.2 4.3 5.5 4.7 5.4 4.7 5.2 6.1 5.0 4.8 5.0 5.0 5.9 4.9 Australian Median 5 years 2010 2011 2012 2013 2006 2007 2008 2009 Australia Median Years
- 9. Australian insider CEOs have consistently delivered higher shareholder returns than outsiders... Median total shareholder returns1) of insider versus outsider outgoing CEOs 2009-2013 15% 10% 5% 0% 14.2% 0.7% 9.8% 4.1% 2009 2010 2011 2012 2013 -10% Strategy& -5% Regionally adjusted annualized total shareholder return Insider Outsider 0.1% -2.5% 9.6% -9.9% -0.1% -3.7% 1) Total shareholder returns are annualised over outgoing CEOs' tenure . Source: Strategy& 2013 Chief Executive Study analysis
- 10. ...and companies with planned CEO successions, that leveraged internal talent, posted the best annualised returns Outgoing Australian CEO – Median Annualised Shareholder Returns1) Median Tenure, for Succession Reason and Source of CEO, Total 2009 – 2013: N = 165 10% 5% 0% -5% -10% -15% -20% Insider/Planned Outsider/Planned Insider CEOs that leave as part of a planned transition provided a median shareholder return of 9.7% 1) Total shareholder returns are annualised over outgoing CEOs' tenure but not adjusted to be relative to the ASX200. Note: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete turnover information. Source: Booz & Company 2012 Chief Executive Study analysis Strategy& 3.5 3.6 3.7 3.8 3.9 4.0 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 5.0 5.1 5.2 5.3 5.4 5.5 Median Shareholder Return Median Tenure Outsider/Forced Insider/Forced
- 11. The proportion of internally appointed CEOs in Australia continued to rise in 2013 Australian incoming CEOs by insider versus outsider status 2007-2013 100% 75% 50% 25% 40% (12) 60% (18) 50% (18) 50% (18) 52% (14) 48% (13) 57% (13) 43% (10) 29% (12) 71% (30) 21% (6) 79% (23) Note 1: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete turnover information. Source: Strategy& 2013 Chief Executive Study analysis Strategy& 33% (15) 67% (31) 2013 2012 2011 2010 2009 2008 2007 Outsider Insider Global % of Insiders 84% 78% 79% 80% 81% 71% 76%
- 12. A higher proportion of both men and women insiders CEOs were appointed globally than locally Incoming and outgoing CEOs by gender and insider versus outsider status 2004-2013 39% 42% 58% 35% 65% 22% 78% Note: Exhibit excludes turnover events resulting from M&A and interims for incoming CEOs and events with incomplete turnover information for incoming or outgoing CEOs. Source: Strategy& 2009-2013 Chief Executive Study analysis Strategy& 61% Male (n = 586) Female (n = 19) Outsider Insider Female (n = 124) Male (n = 5676) Australia Global
- 13. Men continue to dominate the class of incoming CEOs in Australia and elsewhere Australia Incoming CEOs – Male versus Female For years 2004-2013; N = 300 Strategy& 1 1 2 38 3 26 24 26 2004 2005 2006 2007 2008 2009 2010 2 28 1 35 45 19 25 1 23 2011 2012 2013 3.7% (11) 2.1% (124) 97.9% (5,676) Global Average (2004-13) 96.3% (289) Australia Average (2004-13) Female Male Note: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete turnover information Source: Strategy& 2013 Chief Executive Study analysis
- 14. Over the past decade the net number of female CEOs in Australia has grown, but not as much as it has globally Percentage of women CEOs by incoming and outgoing classes 2004-2013 Strategy& Australian Incoming CEOs Australian Outgoing CEOs +42.3% 3.7% 2.6% +75.0% 2.8% 1.6% Global Outgoing CEOsGlobal Incoming CEOs Note 1: The total number of all incoming Australian CEOs is 300 and Global CEOs is 3026, and the total number of all outgoing Australian CEOs is 306 and Global CEOs is 3394; in Australia, the total numbers of women are 11 and 8 for incoming and outgoing CEOs, respectively; globally, the total numbers of women are 84 and 56 for incoming and outgoing CEOs, respectively. Note 2: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete turnover information. Source: Strategy& 2009-2013 Chief Executive Study analysis
- 15. Retention of Australian women CEOs has been in decline and is trending more negatively Difference between the share of incoming women CEOs and outgoing women CEOs 2004-2013 7.0 6.0 5.0 4.0% 3.0% 2.0% 1.0% 0.0 -1.0% -2.0% -3.0% -4.0 Strategy& 1.4% 0.0% 00..01%% 3.7% 2.7% 2.3% 5.0% -4.0% Global 0.5% -2.2% -0.4% 6.9% -0.6% 2.6% 0.0% 1.2% 0.0% 1.8% 0.0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Note: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete turnover information Source: Strategy& 2009-2013 Chief Executive Study analysis Australia
- 16. Women CEOs – in Australia and globally -- are more likely to be forced out of office than men Outgoing CEOs by gender and succession reason 2004-2013 Source: Strategy& 2009-2013 Chief Executive Study analysis Strategy& 27% 45% Female (Australia) (n = 11) 23% 21% 56% Male (Australia) (n = 385) 27% M&A Forced Planned 13% 27% 38% 51% Female (Global) (n = 56) 60% Male (Global) (n = 3319) 11%
- 17. Australian businesses need to focus on succession management that attracts, retains and develops C-suite ready women Tips For CEO Succession Planning 1 Strategy& Know what matters to your business Set diversity objectives that count Deepen your talent pool of insiders Lengthen your talent spotting horizon 2 3 4 5 Be transparent
Editor's Notes
- The case in Australia for using gender-based talent management strategies to improve productivity & performance of organisations and the economy at large has been well made Australian businesses continue to be challenged by their ability to generate and retain a qualified pool of female leaders who can serve in both the C Suite and the Board Room Whilst Board representation reportedly rose to 15.8% in 2013, compared with 13.9% in 2012, Strategy& research indicates that the appointment and retention of women CEOs is trending net negative Insiders are more associated with high performance, and fewer women are in this group, exacerbating the CEO gender gap As the role of the professional Board member increases in prominence, and the focus on gender equity on boards intensifies, this may tempt more women to opt out of the CEO succession race where success appears less attainable and sustainable Australian businesses face the prospect of an increase in undesirable turnover and a shrinking pool of top female talent, as senior women step off the corporate ladder in favour of a seat at the Board Room table This will hinder efforts to achieve parallel improvements in business performance and economic prosperity through increased participation of women in key management and board positions
- <Changes at the top in 2013> In 2013, CEO turnover in ASX200 companies increased to 16.4 percent (from 15.2 percent in 2012). In 2013, there were 50 CEO turnover events in ASX200 companies, yielding an incoming class of 47 CEOs
- <Changes at the top in 2013> Turnover was slightly higher in 2013 (16.4%) compared with 2012 (15.2%), with 11.2% planned, 3.9% forced, and 1.3% due to M&A There was an increase in both planned and forced turnovers, and less turnover due to M&A activity Australia has among the highest overall turnover rates, a trend that has held for the past five years. The percentage of planned turnovers reached 68 percent, a 14 year high – possibly indicative of more effective succession planning An increase in forced turnovers may be indicative of a tougher stance on top-down performance
- <One CEO to the next> Companies with the strongest performance had a higher rate of forced CEO turnover (39 percent in top quartile performers compared with 21.4 percent for companies in the bottom quartile), possibly indicative of a stronger focus on top-down performance mngt in top quartile performers Bottom quartile performers had a higher level of planned succession, more often appointing internal replacements - possibly indicating that performance issues were attributed to other factors than leadership at the top ALTERNATE HEADER: …with top performing companies averaging higher % forced turnover and replacing more from within than externally
- <One CEO to the next> Companies with the strongest performance had a higher rate of forced CEO turnover (39 percent in top quartile performers compared with 21.4 percent for companies in the bottom quartile), possibly indicative of a stronger focus on top-down performance mngt in top quartile performers Bottom quartile performers had a higher level of planned succession, more often appointing internal replacements - possibly indicating that performance issues were attributed to other factors than leadership at the top ALTERNATE HEADER: …with top performing companies averaging higher % forced turnover and replacing more from within than externally
- Australian ‘median’ line is for the entire data set since 2000 & not 2006 – is this a problem? The median for the data set from 2006 is 5.0 and would have been the “same” (@ 5.003) last year
- <CEOs who left office in 2013> In 2013, insiders delivered significantly higher shareholder returns than outsiders, a trend that has held since 2010. Outgoing CEOs’ median tenure increased slightly in 2013 (from 4.2 percent in 2012 to 4.3 percent in 2013), consistent with global trends
- <Women CEOs are more often hired from outside> In terms of professional background, women CEOs are more often outsiders than their male counterparts (42 percent of incoming women versus 39 percent of incoming men CEOs).
- Women made up a greater share of incoming CEOs than outgoing CEOs in total over the past 10 years, both globally and in ASX200 companies In Australia, over the last decade, there have been 42 percent more women CEOs in the incoming than outgoing classes
- <More women are becoming CEOs> Whilst women CEOs in the ASX200 have become more prevalent over the last 10 years, the difference between the proportion of women in the incoming class vs outgoing class has been highly variable, inconsistent with the net positive trend globally Over the past five years, the share of women in the incoming CEO class (3.1% in 2009-13) was lower than in the prior five year period (4.3% in 2004-08), reflecting a downward trend Women made up just 2.2% of the incoming class in 2013 (1 person), down from 6.7% in 2012 (2 people) The gap between share of incoming vs outgoing women CEOs in ASX200 companies is narrowing Appointment of female CEOs in ASX 200 companies lags that of the rest of the world Indications are a tendency to a decline in the rate of appointment of women CEOs Representation of women on boards and in government is increasing at a greater rate than CEO appointments
- <How and when women leave office> They’re more often forced out or transition due to mergers Among outgoing CEOs over the past 10 years, a higher share of women than men were forced out (27% of women versus 21 % of men) or left due to M&A activity (27% of women versus 23% of men) ADDITIONAL POINTS FOR VIEW POINT Female employment in Management positions has shown little movement since 2002, moving from 33.4% of Managers to 34.8% over the period. The low and slow rate of progression of women into senior management levels limits the pool of qualified insiders. It is therefore unsurprising that fewer women are appointed from within, a trend that is likely to continue ASX200 companies appear to be more comfortable with diversity in nationality than gender, going beyond the border more than companies in other regions to find CEOs – this could be an opportunity to attract women leaders from regions with a better track record of developing female talent. However this external focus may increase the proportion of women outsiders, having a compounding negative effect on the rate of appointment of women CEOs. It also poses a broader question around the responsibility of ASX 200 companies for nurturing this leadership capability at home