Management Turnover as Change Agent

Friday, January 28, 2011

Ranbaxy CFO Exits Adding To Firm's Management Changes

Ranbaxy Laboratories RANBAXY.BO, the Indian based but Japanese majority owned generics pharmaceutical firm, just the other day lost its long time employee and current CFO, Omesh Sethi. Sethi announced his resignation from the firm without any explanation. The resignation comes approximately six months after the firm lost its CEO, Atul Sobti, back in August. Ranbaxy, one of the largest generic drug manufacturers and the largest by sales in India, has been beset with a number of problems. The company come under increased scrutiny and ultimately an import ban on a number of its generic drugs by the United States FDA back in 2008 after it was discovered there were a number of manufacturing defects at its plants. According to an article in Bloomberg,

The Food and Drug Administration in the U.S., the world’s largest drug market, in 2008 blocked the import of more than 30 generic medicines from two Ranbaxy factories in India because of manufacturing defects. There is no evidence the drugs are harmful though the violations may lead to defective products, the FDA said at the time.

The firm also lost its original CEO not long before Atul Sobti was hired. According to The Economic Times of India,
The departure of the CFO follows exit of other top senior executives which began with promoter and CEO Malvinder Singh's abrupt resignation in May 2009. A year later, his replacement Atul Sobti also stepped down citing differences with the Japanese firm in running the company.

The problems at the firm were complicated by the fact that control of the firm was moved to Japan after Daiichi Sankyo, one of the largest pharmaceutical company's in Japan, took a 64% controlling interest in the firm. The continuing management turmoil at the firm appears to relate to Daiichi Sankyo's approach for the firm. There was little dispute back in August when the firm's CEO, Atul Sobti resigned. He had major differences with Daiichi's approach to management and strategy. Investors need to keep a close eye on the firm. Ranbaxy has been making great strides to resolve the manufacturing problems that resulted in the U.S. import ban. So far, the firm still does not have a CEO permanently in place.

Wednesday, January 5, 2011

2010 Continues to See Major Declines in Executive Turnover

The last four years have seen continuing dramatic declines in executive turnover. Even as the U.S. and other economies appear to be moving out of the great recession/financial crisis executive turnover has continued to decline while overall general unemployment has remained extremely high.

  • For 2008 CEO turnover declined nearly 10%, CFO turnover declined 14% and overall C-level (as defined by Liberum Research as board of directors, CEOs, CFOs down to corporate VPs) turnover declined nearly 15% as compared with 2007 totals. The number totals continued to decline even more precipitously for 2009. CEO turnover declined 27%, CFO turnover declined 36% and overall C-level turnover declined 30% as compared with 2008′s already low levels. The numbers would be even more stark if compared with 2007.
  • The executive turnover totals continued their dramatic decline throughout 2010. Annual 2010 CEO turnover declined 22%, CFO turnover declined 13%, C-level turnover declined 29% from 2009′s totals.

Total CEO Quarterly Changes by Reason 2005 - 2010 -

Total CFO Quarterly Changes by Reason  2005 - 2010 -

Total C-Level Quarterly Changes by Reason 2005 - 2010 -