ANZ CEOs outlast global CEOs

16th Annual CEO Succession Study: Australian CEOs outlast Global CEOs

The 16th annual Global CEO Succession Study has been released, and as always, we have carefully examined how leading Australian companies are performing against our global peers.

In particular this year, we have focused on comparing how CEOs in leading ASX 200 (ASX) companies compare to their global peers; examining differences between CEOs who have been internally appointed (we call them “Insiders”) versus those that have been selected from an external source to the organisation (we call them “Outsiders”).

Our previous studies have made it clear that insider CEOs tend to provide greater total shareholder returns (TSR) than outsider CEOs, and also that greater proportions of insider CEOs tend to be evident in leading companies that have mature succession processes.

his is a good news story for Australia in that for the first time in five years ASX CEOs are seen to be occupying the top job for longer than their global peers, following four years of tenure based improvement. Our analysis indicates that this is in great part the product of a notable difference in planned turnover events – which have increased in ASX companies – and in particular, a rising incidence of succession planning more in line with leading global HR practice.

The news isn’t all positive however, as further investigation shows that whilst the proportion of outsider CEO appointments is at an all-time low in the ASX, there continues to be a greater proportion of outsider CEOs hired in ASX companies than globally – signaling that leading ASX companies have more to do to align with global high performance succession practices. Furthermore, ASX outsider CEOs are twice as likely to be forced out during a time of change as their insider peers – making it a risky pathway for external hires seeking to succeed in the top job in Australia.

This year’s viewpoint also examines the drivers behind the greater median tenure of our CEOs, as well as placing the spotlight on what it means to be an insider or outsider CEO in our region.

ASX outsider CEOs are twice as likely to be forced out during a time of change as their insider peers.

ASX CEO’s outlast global CEOs

Our findings showed that for the first time in five years, ANZ CEOs had a higher tenure compared to global average – a result that has been trending upward since 2012.

This outcome is attributed to four principal drivers, including:

  • Increase in internal selection and promotion activities
  • Desire for stability after a period of major adjustment
  • Reduced number of short-lived CEOs, bring up median tenure across ASX CEOs
  • Improved succession practices amongst ASX companies

The difference between insider and outsider CEO tenure in ASX companies received specific attention. Our most recent results show that the highest performing companies are continually revisiting their CEO succession plans and making timely decisions on who will lead their organisation next. The results here speak for themselves, with the highest market cap quartile organisations in the ASX deliberately promoting a greater number of insider CEOs than their medium and lower market-cap quartile peers.

Finally, we highlight some of the opportunities and pitfalls for aspiring CEOs, drawing on the analysis from leading ASX companies.


Drivers of Increased ASX CEO Median Tenure

Our research indicates there are several factors driving our CEOs tenure up above the global median (Exhibit 1). This is driven by an increase in the rate of internal promotion and selection, desire for stability from the market after a period of major adjustment, selective reduction in the lowest tenured outgoing, and improved succession practices in top ASX companies.

The number of incoming CEOs that are insiders to the company reached an all-time high in the last four years for both forced and planned turnovers.

Exhibit 1: Global vs. ASX Median CEO Tenure, 2006-2015

Global vs. ASX Median CEO Tenure, 2006-2015

Contrary to their global peers, leading ASX organisations are selecting and promoting internal candidates into the top job to a greater extent. The number of incoming CEOs that are insiders to the company reached an all-time high in the last four years for both forced and planned turnovers (Exhibit 4, 5). As internal hires are more familiar with the organisation, we believe they are able to be more successful in the top job due to a number of factors stemming from immediate cultural integration compared to their outsider counterparts. ASX companies are host to highly relationship-driven business environments, which may mean the ability for internals to integrate and drive results by working with and within the culture, may be more effective than counter-cultural outsider perspectives. As a result, insider CEO appointments tend to stay for longer and achieve higher and more consistent total shareholder return (TSR) than their externally hired counterparts in ASX companies (Exhibit 6). For example, outsider CEOs only outperformed insider counterparts twice in the last seven years.


Exhibit 2: Outgoing outsider
CEO by turnover type (ASX),


Exhibit 3: Outgoing insider CEO by turnover type (ASX),

Insider CEO appointments tend to stay for longer and achieve higher and more consistent total shareholder return (TSR) than those externally hired.


Exhibit 4: Incoming CEO by forced turnover (ASX),


Exhibit 5: Incoming CEO by planned turnover (ASX),

Exhibit 6: Outgoing Insider vs Outsider Total Shareholder Return (ASX CEOs), 2009-2015

Outgoing Insider vs Outsider Total Shareholder Return (ASX CEOs), 2009-2015

The preference for insiders is most marked for leading ASX companies in the highest market capitalisation quartile (Exhibit 7) where there is a premium on maintaining stability, achieving growth and purposefully demonstrating the realisation of planned business transformation outcomes. Larger market leaders in Australia also enjoy scale advantage over smaller, lower performance firms who lack the necessary bench strength to sustain an adequate talent pool. These factors favour the engagement of insider candidates into the CEO role – leaders who have a proven track record within the organisation, who understand how to leverage the organisation’s distinctive capabilities, and work with established staff and stakeholders to achieve investor expectations. In the past 24 months, companies in the highest market capitalisation quartile of the ASX200 hired 70% more insiders than their lowest quartile counterparts – demonstrating a clear preference for a ‘tried and tested’ appointee into the top job.

The median tenure of ASX CEOs has increased since 2012 and in the past year has outstripped the global median. This can be explained by two principal drivers. Firstly greater representation of insider CEOs in ASX companies – insider CEOs tend to have a higher median tenure than outsiders and are less likely to be forced out than outsiders. Secondly, improved succession practices in leading Australian companies, with greater evidence of planned succession (Exhibit 7).

In the past 24 months, companies in the highest market capitalisation quartile of the ASX200 hired 70% more insiders.

Exhibit 7: Market Capitalisation Quartile by CEO Type and Turnover Type within the ASX 200, 2014-2015

Comparing Insider to Outsider CEOs

Placing the spotlight on the differences between insider and outsider CEOs is a key focus for the 2015 Global study – particularly as a clear indicator of succession practice maturity within ASX companies. Insider CEOs are those who have risen through the ranks of an organisation and been promoted internally, whereas outsider CEOs are those that have been hired into the organisation to occupy the position of CEO.


When it comes to CEO appointments, boards of ASX companies tend to select a greater proportion of Outsiders than their global board counterparts.

However, the difference between the global and ASX average is lessening. Since 2004 the share of outsider CEO appointments has reduced by approximately 50% in ASX companies (from 68% in 2004 to 34% in 2015), whereas globally these have slightly increased. This trend indicates that ASX boards are taking a more planned approach to top job succession, much like their global peers and where outsider appointments are required, this is becoming much more a deliberate choice, rather than imposed necessity.

Leading ASX companies are hiring a decreasing number of outsiders but more than the global average.

Exhibit 8: Percentage of Incoming Outsider CEOs by Region, 2012-2015

Outsider CEOs in ASX companies deliver the most erratic results globally

Our results show that globally, insiders have traditionally outperformed outsiders, until 2013. Post 2013, outsider CEOs delivered greater TSRs than their insider CEO counterparts.

In contrast, ASX insider CEOs have tended to deliver much more consistent TSRs than outsider ASX CEOs over the same period. Outsider CEOs in ASX companies have demonstrated the most erratic results since 2009 – more so than any other segment globally (Exhibit 9), making an outsider CEO in Australia a risky choice for a board seeking stability.

Erratic TSR makes Australian outsider CEOs a risky choice for boards seeking stability.

Exhibit 9: Global vs. ASX Regionally-Adjusted TSR by Outgoing CEO Type, 2009-2015

Insider CEOs outlive Outsiders in Australia

With limited exceptions, the tenure of outsider CEOs in leading Australian companies has been consistently less than insiders – typically by about a year – since 2004. Our findings from this year’s study build on the long run picture and reinforce the trend that insider CEOs tend to outlive outsiders.

In 2015 insider CEOs had a median tenure of six years – a year greater than outsider CEOs in leading Australian companies (Exhibit 10). This difference highlights the challenges facing outsider CEOs in ASX companies – who are more frequently forced out of office than insider CEOs.

Exhibit 10: Outgoing CEO Median Tenure by Pedigree (ASX companies), 2004-2015

Outsider CEOs in Australia typically have a lower tenure than insider CEOs.

Outsider CEOs have greater experience globally and across industries

Our results show that there are some benefits and distinct attributes of outsider CEOs when we compare them to insider CEOs that make them a more attractive selection choice. For example, Exhibit 11 below shows that a greater proportion of outsider CEOs have worked in different regions and across multiple industries, as compared to their internal peers. The experience levels of outsider CEOs will no doubt be a much greater asset to an organisation aspiring to take their brand, product and services globally or into a related industry group.

Exhibit 11: Incoming CEO by Type and Experience (ASX companies), 2012-2015

Suggestions for aspiring CEOs

assage into the top job in a leading Australian company requires significant vision, planning and sustained effort. Prior studies have focussed on providing recommendations to boards and investors – this year we provide tips for aspiring CEOs (Exhibit 12).

Exhibit 12: 5 Top Tips for Aspiring CEOS

Tip 1: Target high performance companies at mid-career level

Our findings show that leading Australian organisations are increasingly making internal promotion and selection decisions for the top job. In 2015 the highest quartile performing companies hired twice as many insiders into the CEO position, compared to outsiders. Aspiring CEOs will benefit from targeting a market leading company at least two promotion points below the C-suite.

Tip 2: Watch for organisations with a history of longer tenured CEOs

To our higher performing organisations, stability is key. The risk of perceived instability through signals of change, such as CEO turnover, can reduce investor confidence and erode shareholder value. Moreover, there is an increased drive for growth and purposeful transformation across leading Australian organisations, favouring retention of CEOs who reinforce investor confidence. Aspiring CEOs will benefit from targeting an organisation with a CEO whose tenure is greater than eight years early in their career and staying with the organisation for the long run. Organisations with long term CEOs also, tend to promote internal candidates.

Tip 3: Build skills in major scale transformation expertise

Our research shows that Australian organisations are constantly undergoing change, with a large proportion centred on major scale business transformation programmes. Aspiring CEOs should seek to develop a track record of leading successful large scale transformations to increase their ability to deliver TSR when they are appointed into the top job.

Tip 4: Establish and maintain a mentoring relationship with a former CEO – particularly if you are an Outsider

In Australia, outsider CEOs tend to be pushed out twice as often as insider CEOs at a time of distress and are more likely to deliver lower TSR than insiders in Australia and globally. However, there have been some years where outsider CEOs have delivered significantly greater TSR than insiders in Australia, and because of this, hiring an outsider could be an attractive proposition for companies. As a result, we see that Australian boards are starting to purposefully select outsiders, as part of succession planning – rather than turning to an outsider option without pre-planning.

To help ensure faster orientation into a new organisation and its ways of working, outsider CEOs should seek to build strong relationships internally as soon as possible, and in particular establish a mentoring relationship with a former successful CEO from the same company; helping the outsider to become quickly attuned to informal organisational ways of working and networks which can be leveraged to achieve the intended company impact and necessary TSR.

Tip 5: Top female contenders should consider Australia as a prime destination

Gender diversity is a top priority on the agenda of almost all major organisations globally. However, successful global organisations do not reflect this agenda in 2015 (Exhibit 13). The US/Canada in particular and also the overall global average proportion of female CEO entries is significantly less than in ASX companies. Since 2010 Australia is the only region to show an increasing trend in female CEO appointments. The global average has decreased to 3% compared with 9% in Australia for the proportion of female hires in 2015, whilst US/Canada dropped to an all-time low of 1%. As a result of this trend, we see Australia as a prime destination for top female contenders seeking to progress into the CEO role.

In Australia, outsider CEOs tend to be pushed out twice as often as insider CEOs at a time of distress..

Exhibit 13: Global vs. Australian percentage of Incoming Female CEOs, 2010-2015



The CEO Succession study identified the world’s 2,500 largest public companies, defined by their market capitalisation (from Bloomberg) on January 1, 2015. We then identified the companies among them that had experienced a chief executive succession event between January 1, 2015, and December 31, 2015, and crosschecked data using a wide variety of printed and electronic sources in many languages. We also used Bloomberg to compile a list of companies that had been acquired or merged in 2015. Each company that appeared to have changed its CEO was investigated for confirmation that a change occurred in 2015. Additional details — such as title, tenure, chairmanship, nationality, and professional experience — were sought on both the outgoing and incoming chief executives (as well as any interim chief executives). Companyprovided information was acceptable for most data elements except the reason for the succession. Outside press reports and other independent sources were used to confirm the reason for an executive’s departure. Finally, consultants from Strategy&, PwC’s strategy consulting business, separately validated each succession event as part of the effort to learn the reason for specific CEO changes in their region. To distinguish between mature and emerging economies, Strategy& followed the United Nations Development Programme 2015 ranking. Total shareholder return (TSR) data over a CEOs tenure was sourced from Bloomberg and included reinvestment of dividends (if any). TSR data was then regionally market adjusted (measured as the difference between the company’s return and the return of the main regional index over the same time period) and annualised.


Australian Study

The Australian specific component of the global study identified all companies listed in the ASX 200 since 2000, a data set spanning 584 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. Factiva 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 Bloomberg 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”. All financial data are expressed in Australian dollars as at 01 January 2015. Gender and age based data for ASX 200 companies in 2015 is based on analysis of CEO data from CONNECT4 BoardRoom.