● Incoming female CEOs to ASX200 companies declined from 9.1 percent to 4.3 percent, with one female joining CEO ranks in 2016.
● 87 percent of CEO successions were planned, with forced turnovers declining to a record low of 13 percent.
● 52 percent of incoming CEOs were from outside the company despite insider CEOs delivering more value between 2012-2016 (insiders’ median total shareholder return at 0.25 percent; compared to outsiders’ at -2 percent).
● 43 percent of incoming CEOs were international hires, and 52 percent had previous CEO experience.
The number of incoming female chief executives in Australia’s leading companies has declined in the past year, with one female and 22 male incoming CEOs in 2016, according to a PwC report examining CEO successions around the world.
PwC’s annual CEO Succession study looks at the world's 2,500 largest public companies, including all companies listed in the ASX 200. The study shows the number of incoming female CEOs in Australia decreased sharply from 9.1 percent to 4.3 percent between January 1, 2016, and December 31, 2016.
PwC’s Strategy& Director and report co-author Julian Ballard said: “Gender diversity and getting more women into leadership positions continues to be on the agenda of almost all major companies globally, but we’re yet to make great inroads on this issue.
“In Australia, we were making steady gains between 2013 and 2015, with the percentage of incoming female CEOs increasing from 2.2 percent to 9.1 percent. It’s unfortunate to see a fall in 2016, which equates to more than half of the percentage gain achieved during that period.”
Despite the decline, ASX200 companies continue to host a higher share of incoming female CEOs compared to the global average when looking at the previous five year period, with a 6.0 percent average between 2012-2016 compared to the 3.8 percent global average.
“We might be performing better than our global peers on average over the past five years but this is not a good news story for Diversity in the top job. 4.3 percent of CEO new joiners in the ASX were female in 2016, compared with 6.9 percent of new joiners in 2007. The 10 year new joiner trend is very erratic for incoming female CEOs, with lows at 0 percent in 2009, and under 3 percent in 2011 and 2013,” Dr Ballard said.
The study also shows that the share of forced CEO successions in Australia declined for a fourth consecutive year and is the lowest in 15 years, with a record low of 13 percent (excluding M&A), compared to 19 percent globally.
Dr Ballard said: “When we did this study two years ago the average cost of an unplanned succession event in Australia was $2 billion in forgone shareholder value for each company, so it’s great to see we’re getting better at planning succession events.”
In addition, it shows more incoming CEOs in Australia were hired from outside a company, despite insider CEOs delivering more value in Australia between 2012-2016 (insiders’ median total shareholder return of 0.25 percent compared to outsiders’ of -2 percent).
Moreover, the share of international incoming CEOs in Australia was the highest of any region, at 43 percent in 2016 compared to the global average of only 5 percent. Incoming CEOs in Australia with prior public company CEO experience was also at least 24 percent higher than any other country in the region.
“This study indicates that Australian companies are still using narrow measures to assess the merit of potential CEOs. If you only look at previous CEOs for CEO roles you’re being very conservative and fishing in an extremely small pond, Dr Ballard added.
“We need to move to a situation where Australian boards institutionalise the succession planning process and factor in the advantages of diversity in all its forms.”
Notes to editor:
Australian study methodology
The Australian specific component of the global study identified all companies listed in the ASX 200 since 2000, a data set spanning 617 succession events. We used annual reports and press searches to learn if and when a CEO turnover event had taken place for all these companies since 2000, identifying every company’s CEO for each fiscal year, confirming the turnover event, and determining the reason. Sources such as Thomson Eikon helped us identify announcements of retirements or new appointments of CEOs, as well as presidents and managing directors, for the ASX 200 companies. Total shareholder return data for a CEOs tenure was sourced from Capital IQ in 2016 and includes reinvestment of dividends (if any).
Each company that experienced a CEO change was analysed to confirm the change had occurred, the name of the outgoing executive, the name of the incoming CEO(including determination of whether they were an insider or outside to the organisation), and the true reason for the turnover event. Consistent with the global study, three reasons were identified for a CEO transition event in Australia: Regular transitions, which included planned retirements, the CEOs acceptance of a position elsewhere, health-related departures, or death in office; Merger-based transitions, in which a CEOs job was eliminated after an acquisition; and Performance-related transitions, which included any departure initiated by the board, attributed by the media to poor financial or managerial performance, or where the company was clearly underperforming but the departure was described as being for “personal reasons”. Gender and age based data for ASX 200 companies in 2016 is based on analysis of CEO data from Bloomberg BusinessWeek, 4traders.com and Thomson Eikon.
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