The pressure on the occupants of NSE listed companies’ corner offices seems to be growing, suggest data on the exits of chief executives and managing directors (MDs and CEOs), as per ET reports.
58 MDs and CEOs who were also on the boards quit in the first seven months of 2019, according to data from NSE-listed companies put together by Prime Database’s nseinfobase.com. That was one short of last year for the same period.
Most of them resigned, though situations varied. While the turnover rates through the years have been cyclical, the stress across sectors, declining tolerance for under-performance at the highest level and increased scrutiny on performance and ethics are contributing to the spike in C-suite shakeups, said experts.
As many as 58 MDs or CEOs who were also on the boards quit in the first seven months of 2019, according to data from NSE-listed companies put together by Prime Database’s https://t.co/5Oia8Amj0H. https://t.co/g5Gxjx3dDb— Brand Equity (@ETBrandEquity) August 22, 2019
The business environment has become far more challenging, be it in terms of overall growth, achieving numbers or the volatility and disruption in the environment, said Harsh Mariwala, the chairman of consumer goods firm Marico. “The job of a CEO is getting more and more difficult.”
While CEO remuneration is going up because of the demands of the role, it also comes with higher risk, making the top job tougher to hold on to, said Pranav Haldea, the managing director at Prime Database Group.
“There’s a lot of pressure on company CEOs, not just from the board but also from investors and shareholders. If you’re not performing at par, you have to step down,” Panav Haldea added.
The highest turnover in the past 14 years was in 2018, when as many as 59 MDs and CEos left in the first seven months and 108 in the entire year, the data showed.
That, in fact, was in line with global trends, where CEO turnover spiked in 2018 to the highest point in 19 years, as per a recent PricewaterhouseCoopers Strategy & CEO Success Study.
Study: More MDs and CEOs were dismissed for ethical lapses
Approx 17.5% of the world’s largest 2,500 public companies in the PwC study saw a change in CEOs in 2018, with leaders forced out of their roles at a rate of 3.6%.
More MDs and CEOs were dismissed for ethical lapses than for financial performance or board struggles, for the first time in the study’s history.
Brazil, Russia and India had a higher-than-average CEO turnover at 21.6%.
CEO tenures are getting much shorter today, said Amit Tandon, the managing director of proxy advisory firm Institutional Investor Advisory Services.
Amit Tandon attributed it to two main reasons: stakeholders demanding a lot more from those in the hot seat and two, CEOs exploring options to do something more entrepreneurial, be it on their own or in the startup ecosystem.
“Even family businesses who now have professional management have much higher expectations from these individuals than from someone in the family who would be allowed to continue to hang in there even if they were doing badly,” added Tandon.
“But if a mistake happens, it’s better to disengage soon than allowing it to continue,” Mariwala of Marico said.
Sometimes, a wrong hire could be a wrong decision and whoever was responsible for the hiring would be accountable for that, Mariwala of Marico added.
By ABHINAV RANJAN, DKODING MEDIA