Are CEOs overstaying welcome?
South Africa seems to have its fair share of CEOs who have held fast to the reins at their companies for an extended period – think of Absa’s Maria Ramos, who has been in charge since 2009, Brian Joffe, who steered Bidvest for more than 25 years, and Truworths’ Michael Mark, CEO since 1991.
In fact, research shows that CEOs at SA companies tend to have longer tenures than those in developed countries, with many local firms having drawn-out succession plans, if they have any detail on succession at all.
The average UK CEO, for example, spends 4.8 years in the role, compared with about eight years for a CEO in SA, research by PwC shows.
In part, this trend towards long tenure is backed by financial institutions’ interest in stability. They prefer to invest in companies with long-serving bosses and a record of success rather than those that change their leaders every few years.
“Institutions like to invest in companies that are run by experienced CEOs,” Stanlib analyst Ahmed Motara said.
“You would invest in Bidvest because then you got exposure to Brian Joffe, who built the company and delivered consistent returns.”
It is a perception shift that Motara believes will take a while, but Wits Business School Professor Gregory Lee says things are already changing.
As companies diversify abroad, they require leaders with experience in different markets.
With that, he says, “more international norms are being adopted here”.
This shift is also underpinned by increased activism on the part of investors.
Retail analyst Anthony Clark says SA investors started becoming more active, and less accommodating of CEOs, in about 2010.
“I’d say the majority of shareholders were quite comfortable with CEOs sticking around for more than a decade,” Clark said.
“People didn’t go to AGMs in the late 1990s and early 2000s – things were rubberstamped as long as their investments didn’t do terribly.
“But in the past eight years or so, we have seen investors challenge companies on corporate governance, remuneration and shareholder demands,” he said.
By way of example, he points to Spur Corp’s shareholders, who recently raised flags over the restaurant group’s remuneration policy, as well as disgruntled investors wanting Grand Parade Investments’ Hassen Adams to step back from the company he founded in 1998.
One sector with a heavy weighting in long-serving CEOs is listed property.
The largest property company in the country, Growthpoint Properties, has been run by Norbert Sasse and Estienne de Klerk since 2002.
They have taken it from having less than R1bn in assets to about R133bn – and in so doing have built one of the most reliable property companies in SA, according to Jay Padayatchi, executive director at Meago Asset Management.
Similarly, Rebosis Property Fund, the first majority blackowned and managed real estate group to list on the JSE, has been led by Sisa Ngebulana since he founded it in 2010.
Keillen Ndlovu, head of listed property funds at Stanlib, says property companies have a propensity for founder CEOs because property as an asset class lends itself to leaders who stick around.
“Many real estate CEOs started these companies and built them up over a number of years, earning investors’ trust along the way.
“Trust is very valuable in our industry and not easy to replicate,” he said.
“It’s also typical in listed property for a CEO to roll out a plan over, say, five to 10 years, where they raise capital, which takes time, build up a portfolio and then list it.”