Aussie CEO shelf-life beats global average for the first time

Australia, December 6, 2016 –Thirty-three of the ASX 200 companies saw a turnover in Chief Executive Officer (CEO) in 2015, with the tenure of Australian CEOs edging above the global term in office for the first time in five years, PwC's Strategy& annual study of chief executive succession released today reveals.

  • Tenure of Australian CEOs edges above the global average for the first time in 5 years;
  • Incoming Australian CEOs promoted internally rather than coming from outside an organisation reached an all-time high in 2015;
  • Incoming female CEOs remain stagnant at 3 despite beating the global average in percentage terms (9% vs 3%).

The median tenure of Australian CEOs has risen steadily from 4.2 years in 2012 to 5.5 years in 2015, and for the first time since 2010 it is now greater than the global median tenure at 5.3 years. It is also more than 10 percent greater than the long run average tenure in Australia and has not been at this level since 2008.

“Australia had the greatest rate of CEO turnover in the world four years ago so this is a significant improvement in tenure – up more than 30 percent since 2012,” PwC’s Strategy& partner and report co-author Varya Davidson said.

“Our research shows that there are two key factors driving our CEO tenure above the global median: greater representation of incoming CEOs in Australia’s leading companies who have been promoted internally, and improved succession practices, with greater evidence of planned successions.”

The study also shows that the number of incoming CEOs promoted internally rather than coming from outside an organisation reached an all-time high in Australia in 2015. This is most marked for leading ASX200 companies, with those in the highest market capitalisation quartile hiring 70 percent more insiders in the past 24 months than their lowest quartile counterparts.

“We are now seeing a clear preference for a ‘tried and tested’ appointee into the top job in Australia. Historically, we’ve appointed a greater proportion of outsider CEOs than our global counterparts, but the difference is lessening. Since 2004, outsider CEO appointments have reduced by nearly 40 percent in Australia,” PwC’s Strategy& director and report co-author Julian Ballard said.

“As internal hires are more familiar with the organisation, they tend to be more successful in the top job due to a number of factors stemming from immediate cultural integration compared to their outsider counterparts.

“In Australia, insider CEO appointments tend to stay for longer and achieve greater and more consistent total shareholder return than their externally hired counterparts. In fact, outsider CEOs in Australia have demonstrated the most erratic results globally since 2009, so insiders are the way to go for Boards seeking stability, ” Dr Ballard said.

The number of incoming female CEOs in Australia remains low and has stagnated over the past year despite tripling since 2013 – from one to three. However, the female Australian CEO representation at 9 percent still beats the low global average of 3 percent of incoming hires which saw a decrease from 5.2 percent in 2014.

“In last year's study we saw a slowly increasing share of female CEOs in Australia, so it’s unfortunate to see this stall in 2015,” Dr Ballard said.

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