When new CEO successors take the helm in the consumer goods sector, they’d better prove themselves to the board quickly and quantifiably.
Kimberly-Clark, maker of consumer brands such as Kleenex tissues and Huggies diapers, announced on October 22 that CEO Thomas Falk will be stepping down at the end of the year. Falk has held the top executive spot for 16 years, though shareholder returns lagged the S&P 500 and other consumer goods companies on average during his tenure.
Another long-timer, surpassing Falk by far, is Leslie Wexner of L Brands, the fashion retailer that owns Victoria’s Secret, Bath & Body Works and other big retail and consumer brands. Wexner has been CEO since he founded L Brands more than half a century ago, in 1963. He grew it into a Fortune 500 company in the decades that followed, but since 2015, its stock has plummeted 70%.
Of course, trends such as rising commodities and transportation costs are challenging many big companies in consumer goods as well as the industrial sector, especially older ones that are struggling to find ways to grow. But the impact that stock prices, and by extension boards and investors, have on CEO tenures seems to be increasing, making them shorter and shorter. Expectations are high, and patience is running low.
On October 1 General Electric announced the dismissal of John Flannery, a 30-year company veteran who had only been appointed in August 2017 – cutting off his CEO tenure at just over one year. This was especially surprising, given that previous CEOs Jack Welch and Jeffrey R. Immelt, Flannery’s immediate predecessor, held the job for 20 and 16 years, respectively.
Executives coming into the role of CEO in more recent years, like Flannery, can expect a tenure about a tenth as long as Wexner’s, especially in the consumer and industrial sectors. As the New York Times reports, the average CEO tenure in the consumer goods sector fell by nearly a year, to five years between 2015 and 2017. In the industrial sector, the average tenure fell by a year and a half, to just under five and a half years, according to data provider Equilar.
CEO successors such as Michael Hsu, the Chief Operating Officer who will replace Falk at Kimberly-Clark, can likely expect less time to achieve the turnarounds that boards are demanding. Beginning January 1, Hsu will have to answer to Falk in a new capacity, when the former long-time CEO takes a seat as Executive Chairman of the Board.