Analysis on steroids
20 April 2014 00:33 (South Africa)
Opinionista Johann Redelinghuys

CEO departures and the 'perfect storm' in the boardroom

  • Johann Redelinghuys
Every second day, it seems, there is a CEO whose career is being terminated. Every leadership vacuum causes greater anxiety in the ranks and more uncertainty for stakeholders in the market.

The fallout from our strained economic circumstances is accelerating everywhere. The build-up of pressure is at bursting point at all levels in the corporate hierarchies. It is also felt acutely in the boardrooms. Boards of directors, whose job it is to see to it that the best executive leadership is in place, are often buckling under the strain.

Many of them, especially in the State Owned Enterprises, are facing “the perfect storm” of increasingly strident demands for transformation colliding with equally angry exhortations from shareholders such as the Public Investment Corporation (PIC) for better results.

The profit expectations of shareholders and conflicting views about the right corporate strategy are eating into boardroom solidarity. The demands made on CEOs trying to keep the show on the road in shrinking and uncertain markets cannot be met. Some leave in desperation. Others are taken out at the knees.

The roster is growing rapidly: Cynthia Carroll, who last week announced her departure from troubled Anglo American; board ructions at Telkom, where just about the whole board and the chairman were fired; the CEO, the chair and several members of the board pulled out at SAA; Neville Nicolau, abruptly out of Amplats; and the sad departure last week, lower down the food chain, of Alec Hogg, the founder and CEO of Moneyweb who was hoofed out by Caxton. The list just goes on.

The question is, are these companies better off with the leadership being replaced or not? It must focus one’s mind when, on the day one announces one’s departure the share-price suddenly goes up, as in the case of Cynthia Carroll. But forget for a moment the benefits of a fresh start and a CEO or board with a new vision. What about the sticky processes of recruitment and replacement? With the PIC shouting for a local person to be the next CEO of Anglo and the desperate shortage of competent leadership in the country, how does one pull it all together? The sanguine comments of the government, the major shareholder at Telkom, about finding a new chairman and board of sufficiently qualified directors don’t give us, the consumers and customers much confidence.

There is the further problem, often overlooked and much underrated in such precarious circumstances. Company spokesmen say they will consider and evaluate candidates inside the company as well as in the wider outside market in the recruitment process. They would wish, it is said, to do a comparison and make sure that the best candidate is appointed. This causes rampant anxiety and a whole lot of internal political manoeuvring to jockey for the top job. Inevitably it also causes a noses-out-of-joint feeling in the losers and the potential undermining or even sabotaging of the new CEO by those disappointed not to have made it.

Because much of it happens behind closed doors the key decision-makers believe confidently that they can keep the whole thing under wraps. Nothing can be further from the truth, and in most companies there is a constant buzz of speculation and rumour. In the process, the energy of the company looks inward and away from what should be its real focus: its customers and the market.

Many factors can cloud matters and delay a constructive outcome. One of them is that there is sometimes the optimistic desire to engage with the international market. The search is to find some polished diamond to create a dramatic turnaround and a return to the good old days of profit. The trouble is that selling South Africa in its current state to any international takers is a battle that is hard to win. Sometimes they respond positively at the outset and get into the visit-and-see process only to go home and face a critical wife who then breaks the magic spell. We know it can be done. Ask Edcon and Pick n Pay and Clicks, but don’t let me remind you of Coleman Andrews and some of the others.

Boards of directors get nervous when profits start sliding. CEOs that are challenged can become optimistic and believe that they will turn the business “by the third quarter of next year”. But shareholder activism is a burgeoning sport, and investors are not patient these days.

Where is it all going? What is to be done? Good advice for anyone in a state of anxiety or stress is to sit down and take a few deep breaths. The advice for a country in stress is the same. Slow down, take stock and don’t try and conquer our demons in one day. As I have said before, the haemorrhaging in the most traumatised boardrooms can be stanched by slowing down transformation. Get the most experienced and competent directors, not the most politically correct ones. Give business and the country time to recover. For enterprises like Telkom and SAA, as well as a string of others like the SABC, our wish is for them to appoint deeply experienced chairmen, of any race, who will know how to restore credibility and give us some faith in sound governance once again.

To replace the departing CEOs we can only hope that there will be a fair and transparent process in each case, of engaging with the best candidates, no matter what their political credentials. It’s time we returned to sound business values to lead us out of the mess, and to shelve the frenetic confusion with the political agendas. DM

  • Johann Redelinghuys
JohanRedelinghuysBW

Johann Redelinghuys is a partner at Heidrick & Struggles the international leadership consulting business, which bought the firm Redelinghuys & Partners of which he was the founder. He has been deeply involved in career management and executive search all his life. He is the chairman of the South African company and now heads up its board practice working with chairmen and CEOs focussed on CEO succession, strategic leadership review and board evaluation.

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