Posted Sunday, April 25, 2004; 10.30BST
For all such changes, some management experts and shareholder activists wonder whether the greater willingness to oust CEOs will improve the way companies perform. Rakesh Khurana, an assistant professor at Harvard Business School, finds it troubling that even after they fire a CEO, few boards engage in self-criticism. "It's not clear whether we'll be witnessing any dramatic reconsideration of what went wrong," says Khurana, the author of an acclaimed book criticizing the phenomenon of celebrity CEOs, Searching for a Corporate Savior. Colette Neuville concurs. She is a French shareholder activist who ran public campaigns against Messier at Vivendi and others. As long as the company directors who approved the mistakes of the old CEO continue to serve on the board, she says, similar problems will recur. She also predicts a return of the expansive and often expensive behavior that got so many of their predecessors into trouble. "In the weak economy of the past two to three years, they've cut debt and talked about cash flow," she says. "But when they get wind in their sails, it'll start up again."
Even the most influential institutional investors agree that it isn't enough simply to force out the CEO. Montagnon of the Association of British Insurers believes boards can and should do much more to evaluate their own performance. That's starting to happen in Britain on a systematic basis, he says, adding that the professionalism of boards is on the rise. "We're moving rapidly away from the idea that the job of a director is for retired generals, ambassadors, civil servants and other members of the great and good," Montagnon says.
What are today's companies looking for in a shiny new CEO? No two firms are alike, of course. But among companies across Europe that have swapped out their leaders in the past couple of years, some common themes emerge. Talk of "vision" and "synergies" has been replaced almost everywhere by a laser-like focus on profitability. Debt and heavy-handed micromanagement are out; sustainable earnings and delegating authority is in. Some corporate crises such as Parmalat may be too big for any mortal to solve completely, and point to the need for broader regulatory changes. But the new boys women remain rare in the top jobs in corporate Europe come under enormous pressure to untangle the failed legacy of their predecessors as fast as possible. Here's a look at five factors that help determine whether spring cleaning in the CEO's suite is enough to turn a company around.
The Need for Speed
One obvious yardstick of success or failure is stock price — and the companies whose stock is bouncing back the fastest are usually the ones whose new leaders have acted most quickly to tackle their core problems. In Britain, Cable & Wireless stock is up 50%, after almost doubling at one point since Italian turnaround expert Francesco Caio took over a year ago. He quickly shed loss-making operations his predecessor bought in the U.S. but was reluctant to sell when they didn't pan out. At ailing insurer Royal & Sun Alliance, Andy Haste, the 41-year-old CEO who took over last year, wasted little time in raising $1.8 billion in fresh capital and cutting 20,000 jobs.
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