When it comes to insider knowledge of and commentary on C-suite trends nobody does it better than the experts at Shields Meneley Partners. That was why Joann Lublin and Vanessa Furhrmans, two highly respected reporters from The Wall Street Journal, turned to our very own Hugh Shields for their article exploring the top concerns are for chief executive officers in 2018.
by Gail R. Meneley, Co-Founder and Principal
I am working with a number of exceptional women with successful careers in public and private companies, and are now focusing on private equity as their next stop. They are targeting CEO roles in portfolio companies with revenues from $250M to $1B. Each has held the title of President or General Manager with full P&L for businesses $1+B in the U.S. and abroad, has deep industry experience, and has lived and died by the same profitability sword as men in similar roles.
In fact, they can check all of the boxes related to experience and results that private equity partners look for with a single exception: they have not held the title of CEO.
I get it. The business of private equity is to minimize risk and maximize returns to investors, so it’s natural that partners would prefer candidates — both men and women — with a track record of success as a CEO. But is it the title that is important, or are the real keys to value creation a successful a track record, deep domain experience, long-standing industry relationships, and the ability to attract talent?
I have other questions, too. Why are so many women active in angel investing but so few involved in PE? And, why are there so few PE firms founded and controlled by women?
Is it that they have worked in businesses that didn’t allow them to accumulate necessary wealth? Could be. Do women have a lower risk tolerance than men? The facts don’t support it. Do they have less access to capital? Maybe. Do they have little interest in being a part of the “boy’s club” that makes up the majority of the industry? Could be.
We have worked with 1600 C-Suite executives over the last 20 years. About a third of our clients are women, a reflection of the slow-to-change demographics at the top of Corporate America. All clients go through an in-depth executive assessment when they work with us. We can confirm that there is little difference between the competencies, leadership, motivators, experience and track record of men and women at this level. In fact, if you didn’t know gender, you wouldn’t be able to discern it from the data,
So back to my questions. Would anyone dispute that hundreds of women are qualified — right now — to take on tough PE roles, either as managing partners or CEOs? If women were managing these firms, would the number of women viewed as viable candidates to run portfolio companies increase? Would women be more likely to hire qualified women as portfolio company CEOs? Would today’s women be more likely to steer investment toward companies led by other women?
I have lots of questions, no answers, and lots of opinions. I welcome your thoughts on the subject.
By the way. I know some highly qualified women ready to turnaround and/or scale one of your portfolio companies. I’d be happy to introduce you.
Reports released this month by ADP, Liberum Research, and the U.S. Bureau of Labor Statistics show that unemployment continues to shrink as new jobs are added in the private and public sectors. In particular, January executive turnover numbers were overall positive, which is surprising given current stock market trends and the slowdown of the American economy (which we explored in the previous blog post). This, combined with steady job growth and low unemployment, could mean a positive turn for the economy.
A report by Liberum Research, the largest database of C-level executive change at public companies, shows that executive turnover in public companies remained solid at the beginning of this year. January mostly saw increases in turnover compared to January of last year. CEO changes increased 18%, overall C-suite changes increased 15%, and board of director changes went up 5%. The only decline for January was in CFO changes, which went down 2%. Compared to December 2015, January 2016 saw more decreases in executive turnover. CEO changes were down 1%, CFO changes were down 6%, and C-suite changes were down 22%. Board of director changes, by contrast, increased by 16%. The drug and biotech industry saw the most amount of change during the month of January across all categories examined by Liberum. There were 174 changes in the management category, 20 in CEO, 24 in CFO, and 75 in board of director.
In terms of overall employment, ADP’s January Employment Report showed an increase of 205,000 job in the private sector from December to January. The U.S. Government’s Bureau of Labor Statistics Employment Report reflected a growth of only 151,000 nonfarm jobs in January. The report showed that job gains were led by the retail trade, food services and drinking places, health care, and manufacturing industries. Unemployment was down by 1.1 million people, or 0.8 percentage point, compared to January 2015.
Just over a month into 2016, large companies are reporting cutbacks after a tough fourth quarter. Half a dozen companies like Yahoo, who is selling some of its assets, and Johnson & Johnson announced plans to cut thousands of jobs. Other companies like Chevron and Norfolk Southern are cutting back on capital spending. Companies in the S&P 500 index are expected to report that adjusted fourth quarter profits are down 4.1% and sales are down 3.5% from the same time a year ago. The stock market’s fall as well as a uncertain trends in consumer spending have caused much concern among financial leaders and investors about a slowdown in the American economy.
American consumers make up about 70% of the economy in the United States, and they may be saving more than they are spending or simply spending differently than in previous quarters. The economy only grew 0.7% between October and December. As 2015 came to an end, incomes rose slightly in December, but spending fell compared to November. Retail sales were also down according to government figures. American consumers, however, were spending more on their homes last year, purchasing items like roofs, counter tops, and dishwasher and buying a record number of cars. Companies like Starbucks, Ford, and Nike continue to report promising domestic sales this year. Consumer packaged goods companies see signs that consumers in the U.S. are willing to spend a little more on new, brand-name, or higher-quality products. Procter & Gamble reported a 2% increase in organic sales, which is an improvement from a 1% decline the previous quarter.
There is more good news for the consumers: the unemployment rate has gone down to a mere 5%, and young college graduates are reportedly making more money. Temporary staffing is also seeing significant growth. But this increase in income for the American consumer is being saved and not spent: the Commerce Department reported that Americans saved a total of $753 billion in December 2015, a huge increase from the $653 billion saved in December 2014. The timing for the increase in savings is not ideal since the economy does not grow when spending slows.
With the uncertainty presented by the current American economic climate, few executives are anticipating significant growth this year. Industrial and manufacturing companies are particularly diligent about their efforts to cut back on spending. Norfolk CEO James Squires recently told investors that the company is focused on cost reductions, reporting lower coal shipments and higher retail inventories. Heavy equipment and vehicle maker Oshkosh Corp. and U.S. Steel Corp. also reported cautious clients who are wary of taking on large projects before they are certain what the economy will do.
If more jobs are created this year, this could be the key to higher corporate profits. Unemployment continues to shrink, however, there still is major concern among economists that the slowdown is here to stay due to corporate caution and consumer trends.
Executive turnover in April, 2015 was higher than in past months, but not significantly different. In the April Reports by ADP and Liberum Research Board of Director and C-suite positions showed a scattered picture for turnover. Liberum believes that executive turnover numbers will grow over the summer as the economy improves.
But, for the first time in a few years, Liberum reported a decline in turnover for most C-Suite and Board of Director positions. When April 2015 is compared to April 2014 declines in turnover occurred in the four key categories: CEO changes increased 7% while CFO changes declined 4%, other C-level changes declined 9%, and Board of Director changes declined 12%.
April 2015 to March 2015 comparisons found executive turnover was mixed. CEO changes declined 9%, CFO changes declined 5%, whereas C-level changes in total increased 2%. Board of Director changes increased 14%.
Once again the industries with the highest C-Level management changes were drugs/biotech, banking and energy. Specifically, these industries represented the highest level of change for CEO’s and Boards. For CFO’s business services, health care and manufacturing were the industries that represented the highest turnover.
Liberum has the largest database of C-level executive changes at public companies. For more information please contact Mr. Richard Jacovitz, SVP Director of Research (email@example.com). ADP offers benefit administration, human resource and retirement services for businesses of any size.
2014 turned out to be similar to 2013 with respect to senior executive turnover. The economy is improving and employment improved in 2014, but the long term unemployed and slow growth in salaries for most workers continue to be problematic. Liberum Research points out in a recent report that executive turnover totals for C-level executives in North America showed declines from 2009 through the second quarter of 2011. Since then, C-level turnover has been increasing, but this has been in “fits and starts” with 2014 C-level turnover being significantly below that seen in 2008. Liberum believes that the trend will remain about the same through 2015.
The table below details the annual C-level turnover as registered through Liberum Research’s Management Change Database for 2008 through 2014.
For more information about Liberum’s Online Management Change Database contact Richard Jacovitz at firstname.lastname@example.org.
According to Government statistics, Liberum Research and ADP’s November Employment Report there are positive signs for increasing hiring and executive turnover. In particular, we have noticed an increase in executive turnover for a few months in a row which makes us bullish for executives in a career transition. Liberum reports executive turnover totals were positive in the year to year November 2014 to the month of November 2014. For November 2014 increases in turnover occured in all four key categories. CEO changes increased 5% from November a year earlier, CFO changes increased 23%, C-level changes increased 5%, and board of director changes increased 2%. Liberum anticipates executive turnover will continue to grow as we move into the winter and the early spring which, if true, will bode well for the overall North American economies.
For more information contact:
- Liberum Research – The largest database of C-level executive change at public companies. Frequently quoted in the financial press, Liberum helps investors monitor this important, continuous stream of investment events.
- ADP – provides comprehensive payroll services, employee benefits administration and human capital management solutions for businesses of all sizes.