Posted Sunday, April 25, 2004; 10.30BST
That kind of boardroom drama is becoming more common in Europe. For good reasons or bad, to respond to a scandal or just to improve corporate governance, more and more companies are parting with their leaders. Indeed, being a chief executive officer these days is a bit like being on a reality-TV show: no one knows who will get voted out next. In the U.S., Michael Dell is out at Dell, and Michael Eisner is no longer Disney chairman. In Europe in the past month alone, London-based SSL International, maker of Durex condoms and Scholl foot products, replaced its CEO. German tech company Infineon unexpectedly lost its blunt-speaking CEO, Ulrich Schumacher. He said he was leaving for "personal reasons," but it's clear that the board and shareholders were dissatisfied with the company's performance. An interim chief, Max Dietrich Kley, now runs the company. A revolt by French shareholders led to the ousting of the Eurotunnel chief executive, Richard Shirrefs, and its board. Former travel executive Jacques Maillot leads the motley band of characters who are now trying to keep Eurotunnel out of bankruptcy.
Of course it's too soon to know if those changes will succeed. But a new generation of "clean-up" CEOs is already in charge. And a Time analysis of those high-profile executive shuffles shows what works, and what's merely a short-term fix. Over the past two years, chief executives of 17 of the euro zone's 50 biggest public companies have been replaced, with almost half of them leaving under pressure and that doesn't include a cluster of big British, Swiss and Swedish firms where heads have also rolled. Companies affected include financial giants like Germany's Allianz and Credit Suisse of Switzerland, media titans such as France's Vivendi Universal and Germany's Bertelsmann, and a bevy of telecom behemoths like France Télécom, Deutsche Telekom and Britain's Cable & Wireless. Almost no sector has been spared, from manufacturing to retailing.
The purges signal that corporate boards and shareholders across Europe are fast catching up with the U.S. in refusing to tolerate scandal, sustained losses or other indications of poor management. In a study published last year of 2,500 publicly traded companies around the world, consultants Booz Allen Hamilton found a sharp increase in the turnover of CEOs and it's Europe's chief executives who are now the biggest losers. Between 1995 and 2002, the frequency of CEO succession in Europe increased by 192%, compared with a rise of just 2% in North America, where company bosses have traditionally enjoyed less job security. The days when CEOs in Europe could count on cozy relationships with boards, governments and financial institutions to protect them are gone. In part, that' s a reaction to the irrational exuberance of the late 1990s, when CEOs like Jean-Marie Messier of Vivendi acted like rock stars and paid themselves accordingly and to the woes that have hit European firms such as Italy's Parmalat and the Dutch retailer Ahold. But it also reflects the influence of U.S.-style investor activism, and the growing clout of American pension funds in stock markets across the Continent. "The performance culture has come to Europe," says David Newkirk, a Booz Allen senior vice president.
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