Tuesday 24 April 2018

Global CEO a myth; most firms opt for locals

Dubai, May 12, 2014

The “global CEO” as commonly thought of is a rarity and the trend world-wide seems to be “local” and “native”, according to a new study.

About 76pc of new CEOs in 2013 were insiders who were promoted from within the company (compared with 71pc in 2012). As much as 80pc were nationals of the same country as the company’s headquarters and 65pc did not have experience working abroad, said the newly released 2013 Chief Executive Study from Strategy& (formerly Booz & Company).

“Companies continue to select CEOs who are familiar faces, particularly when it comes to nationality and international experience, suggesting that the ‘global CEO’ is more mythical than real,” said Per-Ola Karlsson, senior partner at Strategy& and co-author of the report and the managing director of Dubai.

The vast majority - 70 per cent - of CEO turnovers at the world’s largest 2,500 public companies in 2013 were planned events, as opposed to forced turnovers or the result of mergers.

“The high proportion of planned turnovers is a strong signal that companies are continuing to take an active, considered approach to putting in place new leadership,” said Gary L Neilson, senior partner at Strategy& and co-author of the 14th annual global chief executive study, which examines trends and patterns among incoming and outgoing CEOs of the world’s 2,500 largest public companies.

The current study looks at women CEOs over the past 10 years as well as overall succession trends with a focus on 2013’s incoming class of CEOs.

CEO turnover at the world’s largest companies in 2013 decreased slightly to 14.4pc from 15pc in 2012—well within the range of turnover generally expected during non-recession periods.

“While the CEO succession rates in the Middle East continue to be higher than the global average, we have seen a meaningful decline this year in this region as well and are now approaching the global levels,” said Karlsson.

Other notable study findings are: The median age of incoming CEOs was 53 and CEO tenure has remained relatively steady over the past five years – but rose slightly in 2013 to the 14-year median of five years.

The study includes two other findings that illuminate what companies are looking for in a CEO. First, the percentage of CEOs appointed with joint CEO/chairman titles decreased for the third straight year to an all-time low of 9pc.

“The fact that joint appointments as CEO and chairman is at a low level is a sign of good governance, reflecting increased accountability and decreased conflict of interest,” Neilson said.

Second, the share of CEOs with MBA degrees has increased to 28pc in 2013 from 19pc in 2003 - a rise of nearly 50pc over 10 years and a trend the study’s authors expect to continue.

In eight out of the last 10 years, the proportion of women in the incoming class of CEOs has been larger than the proportion in the outgoing class, indicating that women CEOs are becoming more prevalent among the world’s largest 2,500 public companies.

 Over the last decade, there have been 75 percent more women CEOs in the incoming than outgoing classes. Over the past five years, the share of women in the incoming CEO class (3.6 percent) was considerably higher than in the prior five-year period (2.1 percent). • Despite these trends, women made up just 3.0 percent of the incoming class in 2013, a 1.3 percentage point drop from 2012.- TradeArabia News Service

Tags: Companies | CEO | Strategy& |

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