Top execs should be presidents not monarchs
This appeared in the the Judgment Call column of the Financial Times on 24th October 2007
It used to be said that Unilever and Proctor & Gamble ran management training programmes to provide brand managers for each other. Years ago, a senior executive at one of those companies told me that the really canny thing to do was to recruit a proportion of duffers that he then ensured were poached by his rival. But he couldn't be sure that the other company wasn't doing the same thing. At the most senior levels, dangerously similar principles apply. And invariably there is only one top job. Big companies don't resemble meritocracies so much as medieval courts - if you're not in favour with the monarch you might as well flee ahead of execution. However talented the CEO is, other talents are going to leave, which is bound to erode shareholder value. So what can institutional shareholders do? My suggestion is to do away with the monarchies in favour of fixed-term presidencies. If CEOs had a maximum of two four-year terms to serve, it would keep everyone on their toes. Some companies would lose great CEOs after eight years, but it would be the same for everyone. And it might even bring salary packages down. Every little helps.