Through the glass ceiling and off the cliff

Strategy&’s 14th annual study of chief executive succession in the ASX-200 has found that female CEO numbers are declining faster in Australia than globally, and that improved succession planning is tied to increased gender diversity and shareholder returns.

Strategy& partner and report author Varya Davidson said the annual study, which has covered 304 companies since its inception in 2000, had a special focus on gender this year.

“The ASX-200 is already lagging overseas markets on gender diversity in CEO ranks but the flip-side to this is the progress made at board level and especially on government boards and committees which are streaking ahead,” Ms Davidson said.

Ms Davidson added that over the past decade the net number of women CEOs has increased but in the past five years – specifically in 2013, 2011 and 2009 – the retention of women CEOs has declined.

At ASX-200 companies in 2013:

• women comprised 2.2 per cent (one out of 46) of incoming CEOs, down from 6.7 per cent in 2012 (2 out of 30)
• overall female ASX200 CEO numbers in 2013 fell to 6 (3 per cent) from 7 (3.5 per cent) in 2012.

“Despite all the talk about improving gender diversity in senior management ranks, the ASX-200 has yet to make great inroads on the issue,” Ms Davidson said.

Succession planning is the solution

Ms Davidson said the answer lay in improved succession planning.

“Australian companies are improving how they appoint CEOs with planned successions accounting for 68 per cent of all CEO turnover in 2013 compared with 60 per cent in 2012,” she said.

“The number of planned successions in 2013 was the highest since the study began.

The shareholder advantage

Ms Davidson said shareholders were a clear winner from improved succession planning.

CEOs appointed from internal ranks generated median total shareholder returns of 14.2 per cent in 2013 compared with just 0.1 per cent for CEOs appointed externally.

In the period 2009-13 internally appointed CEOs who left due to planned succession achieved median annualised shareholder returns of 9.7 per cent compared with 4.2 per cent for CEOs appointed externally.

Despite insiders delivering greater shareholder value, internally appointed CEOs account for 67 per cent of Australian CEOs compared with 76 per cent globally.

Ms Davidson said improved succession planning would also help address gender diversity.

“Until more companies develop succession plans with deeper talent pools that identify female CEO candidates earlier in their careers we are unlikely to see a meaningful and sustained increase in the number of female CEOs.

“Australian CEOs’ brief tenure combined with our track record of hiring outsiders shows that Australia’s biggest businesses need to do more work developing their internal talent pools.”

Women: Beyond the C-suite

The number of women represented on ASX200 boards and senior government boards and committees is significantly higher than in senior corporate management ranks, and it’s on the rise.

Government boards and committees have more than double the share of women directors than the ASX200, which has nevertheless improved perhaps in part due to the ASX gender diversity recommendations.

In 2013:

• 47.6 per cent of the 1069 new government board appointments in 2012-13 were women
• women hold 41.7 per cent of total Australian government board appointments, up from 38 per cent in 2012
• women held 39.3 per cent of seats on the top 34 paid government boards and committees, up from 35.9 per cent in 2012
• women held 15.8 per cent of all ASX 200 board seats, up from 13.9 per cent in 2012

“The public sector is clearly leading the charge on promoting gender diversity at its most senior leadership levels,” Ms Davidson said.

“Australian public companies need to find out why they are missing out on attracting the best female talent.”

Life as an Aussie CEO: It’s a short one

The lifespan of Australian CEOs stabilised in 2013 at 4.3 years, but remains below the global median of five years (up from 4.8 in 2012) and below the Australian median for 2006-13.

Those forced from the job have a median tenure of 3.1 years compared with 4.7 years for those who leave through planned succession. Forced turnovers also rose, but this was offset by lower M&A activity.

During the year 16.4 per cent of the ASX200 hired new CEOs compared with 15.2 per cent the year before.