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Unilever boss is the latest in a long line of blue chip bosses heading for the door
Thursday 06 Dec 2018 Author: Daniel Coatsworth

The announcement that Paul Polman is stepping down next year as chief executive (CEO) of consumer goods giant Unilever (ULVR) is significant for more than one reason.

While his departure isn’t really a surprise, given shareholders recently won a battle to keep the company’s headquarters in the UK and its place secured in the FTSE 100, Polman’s exit also makes him the fifth FTSE 100 CEO scheduled to be replaced in 2019 – and we haven’t even started the year yet.

Furthermore, there have already been 16 CEO changes among FTSE 100 stocks in 2018, well ahead of the average of 12 since 2011.

One of the last times this amount of change happened was 2007 when 17 companies in the FTSE 100 index had new CEOs. At that point, the economy was doing well and the departing leaders arguably got out at the top. Fast forward to the present and it does seem like we are in a familiar situation.

Various parts of the world are seeing a few creaks in their economy and life seems to get tougher (unless you are in the US). Many of the current batch of departing CEOs will be leaving with large salaries, generous pensions and hopefully a legacy of earnings growth.

The new batch may find it a lot tougher, particularly if global economic activity starts to become volatile.

Some of the new CEOs were hired to fix a business. Others have been hired to re-energise a company experiencing structural end-market changes, including Carolyn McCall at media group ITV (ITV). And some are just following the cycle of natural replacement and inheriting the top seat at a business already in top shape, such as Brendan Horgan at construction equipment rental group Ashtead (AHT).

We know there will be new heads at insurers Aviva (AV.) and Direct Line (DL.) either this year or next year although they have yet to confirm who will be the new CEOs.

In the case of the latter, incumbent Paul Geddes told the Financial Times in August that he will be leaving after 10 years in the job, which he said was the right length of time for a CEO. Accountant PWC said in May 2017 that five years was the global average tenure for a chief executive.

Running a FTSE 100 company is a very demanding job and shareholders will not put up with a sub-standard performance. While only a few CEO changes this year (and those scheduled for 2019) have been linked to business troubles, it seems fair to suggest that next year’s revolving doors could be spinning even faster if leaders don’t have the skills to navigate their ships through choppier waters.

We would keep a close eye on Standard Life Aberdeen (SLA) and Kingfisher (KGF) as two prime candidates for leadership change, particularly because their shares have been miserable performers this year.

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