Management Turnover as Change Agent

Monday, November 11, 2013

October Executive Turnover Defies Analyst Expectations

Liberum's executive turnover data for October 2013 appeared a bit more positive for the American economy than the previous month of September.  Three out of the four key executive turnover categories (CEOs, CFOs, C-level Execs and Board of Directors) saw percentage increases from the same month a year earlier and from the previous month of September 2013.  The more positive trend for October, however, was not evidenced in the latest monthly employment numbers released last week by ADP's October Employment Report.   

According to the ADP October Employment Report:

"According to ADP National Employment Report findings, the U.S. private sector added a total 
of 130,000 jobs during the month of October, well below the average of the last twelve months,” 
said Carlos Rodriguez, president and chief executive officer of ADP. "Small business growth 
was down from the previous month, while payrolls among large enterprises showed an 
increase." 
Mark Zandi, chief economist of Moody’s Analytics, said, "The government shutdown and debt 
limit brinkmanship hurt the already softening job market in October. Average monthly growth 
has fallen below 150,000. Any further weakening would signal rising unemployment. The 
weaker job growth is evident across most industries and company sizes.” 
The U.S. Department of Labor's Bureau of Labor Statistics (BLS) released its employment numbers last Friday, a week late due to the recent government shutdown.  Liberum analysis of our executive turnover totals has coincided more closely with the BLS' latest numbers which were much better than those reported by ADP and originally expected by most analysts.

 Below is a breakdown of Liberum's key executive category percentage changes for October 2013 compared with October a year earlier and the previous month of September 2013.   
  • For October 2013 CEO changes declined 3% from a year earlier, CFO changes increased 17%, overall C-level (as defined by Liberum Research as board of directors, CEOs, CFOs down to corporate VPs) changes increased 10% and board of director changes increased 5% as compared with October 2012 totals. 
  • The month to month change in executive turnover (September 2013 to October 2013) showed a somewhat similar picture with no change in CEOs, CFO changes increased 6%, overall C-level changes increased 16% and board of director changes increased 22%, respectively.       
Below are the overall turnover totals for October: 
KEY CEO CHANGES - OCTOBER 201332 COMPANIES WITH CEO CHANGES WORTH RE-EXAMINING 
According to Liberum's Management Change Database, a total of 210 CEO related changes occurred during October 2013. Here are 32 from the time period that caught my eye.  By significant, I'm looking for situations where I think a particularly strong or weak choice has been made - given the apparent current state of the company - or where there is an interesting special situation. 

DATE   COMPANY TICKER  EXCHANGE  MARKET CAP $ MILLIONS    
10-02 Altair Nanotech, Inc.  ALTI  NASDAQ  30
10-02 Ener Core Inc   ENCR   OBB  106
10-02 Pyramid Oil Co    PDO  NYSE   25
10-03 United Online, Inc.   UNTD  NASDAQ  739
10-04 Farmers National  FMNB  NASDAQ  116
10-06 Basic Energy Srvcs.  BAS  NYSE  510
10-06 Blacksands Petrol  BSPE  OTN  36
10-08 Det Norske   DETNF  OTN  1885
10-09 Cognitiv Inc   COGV  OTN  188
10-09 Wave Systems Corp   WAVX  NASDAQ  42
10-10 Arcis Resources C  ARCS  OTN  2
10-10 Lyris Inc   LYRI  OTN  12
10-11 American Railcar   ARII  NASDAQ  859
10-14 Burberry Group Pl  BURBY  OTN  10113
10-15 Superior Indust Int'l   SUP  NYSE  499
10-15 Ucp Holdings, Inc  UCPH  OTN  12
10-16 Circa Enterprises   CTO Canada  4
10-16 Citrix Systems, Inc.  CTXS  NASDAQ  10619
10-16 Usell.Com Inc  USEL  OTN  22
10-17 Cca Industries, I   CAW  NYSE  22
10-17 McDermott International  MDR  NYSE  1786
10-21 Dussault Apparel  DUSS  OTN  424
10-24 Ixia  XXIA   NASDAQ  1123
10-24 Maxwell Tech. Inc.   MXWL  NASDAQ  239
10-25 Lassonde Industri LAS-A.TO 649
10-25 VirtualScopics, Inc. VSCP 13
10-28 Lorus Therapeutic  LOR  TOR  13
10-28 Sed International  SED  NYSE  5
10-29 AZZ incorporated   AZZ  NYSE  1136
10-30 Randstad Holding  RANJF  OTN  9676
10-30 Teva Pharmaceutical Ind   TEVA  NYSE  32600
10-31 Maxcom Telecom Ad  MXT  NYSE  205
OCTOBER 2013 MANAGEMENT CHANGE STATISTICS
C-LEVEL MANAGEMENT CHANGE STATISTICS
GRAND TOTAL - 1486
TOP INDUSTRY SECTORS
> Drugs/Biotech - 146> Energy - 120
> Metals/Mining - 89

OCTOBER 2013 CEO CHANGE STATISTICS
GRAND TOTAL - 210
TOP INDUSTRY SECTORS
> Drugs/Biotech - 22> Energy - 21
> Banking - 13

OCTOBER 2013 CFO CHANGE STATISTICS
GRAND TOTAL - 210
TOP INDUSTRY SECTORS
> Drugs/Biotech - 21
> Metals/Mining - 20
> Energy - 17

OCTOBER 2013 BOARD OF DIRECTOR CHANGE STATISTICS
GRAND TOTAL - 514
TOP INDUSTRY SECTORS
> Drugs/Biotech - 60
> Energy - 55
> Metals/Mining - 39

Investors need to diligently monitor key management changes. Certain management changes should be viewed as a "special situation" that can have a direct and major impact on a company's performance and share price.
  • New CEOs know more than the market about the company.  Their decision to take the position contains information.  Likewise the departing CEO. 
  • Likewise departing CFOs New CEOs will bring new skills and often-times a new direction.  This is normally significant, and worth analyzing.