Management Turnover as Change Agent

Thursday, October 2, 2014

Latest Executive Turnover Data Does Not Correlate With Employment Growth Figures

The latest executive turnover numbers remain far more muddled than Liberum expected. Both the September totals and the latest quarterly executive turnover numbers have failed to indicate a trend for where executive turnover will be going in the near future. To make matters more complicated, Liberum Research's latest executive turnover numbers have not correlated with the job growth numbers that were just released October 1, from ADP or with the latest decreased number of people seeking unemployment benefits released from the government.  ADP's September Employment Report results were far more positive than the executive turnover numbers Liberum tracked over the same period.  This lack of correlation between these two data categories is a bit unusual.  It is possible the employment numbers to be released from U.S. Government's Bureau of Labor Statistics (BLS) later this week, will correlate more closely with Liberum's latest executive turnover figures, we will just have to see.

Private sector employment increased by 213,000 jobs from August to September.

"September’s jobs added number marks the sixth straight month of employment gains above 200,000,” said Carlos Rodriguez, president and chief executive officer of ADP. “It’s a positive sign for the economy to see the 200,000-plus trend continue.”
Mark Zandi, chief economist of Moody’s Analytics, said, "Job gains remain strong and steady. The pace of job growth has been remarkably similar for the past several years. Especially encouraging most recently is the increasingly broad base nature of those gains. Nearly all industries and companies of all sizes are adding consistently to payrolls.” 

While Liberum has been a bit surprised about the latest executive turnover numbers, we remain positive about the American Economy and continue to expect executive turnover numbers to trend upward as we move into the Fall and early Winter months. 

Liberum has put together below, a six plus year quarterly breakdown of executive turnover totals for CEOs, CFOs and C-level executives covering North America. Most of the below quarterly numbers showed continuing declines until the second quarter of 2011.  At that point, the numbers began to reverse themselves.  Turnover at the executive levels of corporate America began to grow but not consistently and that trend has continued.  

Anyone investing in the market must pay special attention to executive turnover both at the top and the middle executive ranks.  Failure to do so, will result in lost opportunities or worse. To take advantage of these changesget a free trial to Liberum's OnlineManagement Change Database.  Just call Richard at 212-988-5497 or send an email to requesting your free trial.  Within a day of your trial, you will have access to nearly 200,000 data points from which you can generate ideas and daily information on who ischanging jobs at the top.
Below is a simple table outlining the quarterly turnover totals as registered through Liberum Research's Management Change Database for 2008 through the third quarter of 2014 for CEO, CFO and overall C-level turnover.  

 Total CEO Turnover Comparisons   
 Year 2008    2009 2010 2011 2012 2013 2014   
1st Quarter 745491 388346 680 583 500 
 2nd Quarter596 380321 581665 619 527
 3rd Quarter533409298713 636 627 557
 4th Quarter461430328697 673 636NA
 Annual Total2,3351,7101,3352,337 2,6542,465 1,584

 Total CFO Turnover Comparisons 
 Year 2008    2009 2010 2011 2012 2013 2014   
1st Quarter 593 332 296 280 640 495  468
 2nd Quarter551 326 273 404612 557   595 
 3rd Quarter438 279 256629 598582  550
 4th Quarter364 313  258   476569562 NA 
 Annual Total1,9461,250 1,0831,789 2,4192,196 1,613

 Total C-level Turnover Comparisons
 Year 2008    2009 2010 2011 2012 2013  2014   
1st Quarter 6735 4061 34532863 5442 3971 4083 
 2nd Quarter7430 5051 3199 404150364102 4117 
 3rd Quarter4865 3690 25225349 423541233950 
 4th Quarter4277 3439  2381   4596 41974196NA 
 Annual Total23,307 16,241 11,55516,849 18,91016,392 12,150

The latest monthly comparison figures with regard to executive turnover for September 2014 as compared with those of September 2013 and August 2014 and September 2014 are as follows:  
  • CEO turnover for September 2014 declined 17% from that of September 2013, CFO turnover declined 7%, C-level turnover declined 5% and Board of Director turnover declined 14%.  
  • The the month to month change from August 2014 to September 2014 was a bit more positive. CEO turnover increased 11% for CEOs, declined 12% for CFOs, increased 6% with regard to C-level changes and declined 9% for Board of Director changes.  
In the below report, Liberum has focused on forty five CEO changes of special significance for the month of September out of a total of 175. We have also put together the overall turnover figures for the month of September 2014.  The below information is just illustrative of how investors could view executive turnover and its possible relationship with a company's performance. The same could be done for COOs, Presidents, Chairmans, etc. just through the Liberum database.

09-01 American International Group, Inc. AIG  79991
09-01 Luxottica Group S.p.A. (ADR)  LUX  25308
09-02 Danaher Corporation  DHR  53546
09-02 Gordmans Stores  GMAN  70
09-03 Baldwin Technology Co. BLD
09-03 Trans World Entertainment Corporation  TWMC  115
09-03 Westell Technologies, Inc.  WTSL  70
09-03 Willbros Group, Inc. WG  530
09-04 Alcatel-Lucent (ADR)  ALU  9377
09-05 First Mountain Bn  FMBP  9
09-05 Triple-S Mgmt Cl  GTS
09-06 Positron Corp  POSC
09-08 Capital Product P  CPLP  918
09-08 Hertz Global Holdings, Inc.  HTZ  12522
09-08 International Paper Company  IP  20659
09-08 Reneuron Group  RENE.L
09-09 Lighting Science  LSCG  37
09-11 Altisource Portfo  ASPS  2252
09-11 Mri Interventions  MRIC  68
09-12 Vicon Inds Inc VII  16
09-16 Landec Corporation  LNDC  337
09-17 Agilent Technologies Inc.  A
09-17 Insulet Corporati  PODD  2033
09-18 Continental Resrc  CLR  24783
09-18 Hudson City Bncp  HCBK
09-18 Oracle Corporation  ORCL  175100
09-19 JetBlue Airways Corporation  JBLU  3210
09-19 Solaris Power Cel  SPCL
09-22 Medijane Hldgs In  MJMD  12
09-22 Response Biomedic  RPBIF  9
09-22 Thoratec Corp.  THOR  1495
09-24 Activecare Inc  ACAR  14
09-24 Aja Cannafacturin  AJAC   339
09-24 Malvern Bancorp,  MLVF   71
09-24 That Marketing So  VSHGD  15
09-25 Sears Canada Inc  SCC.TO  1299
09-25 Success Holding G  SHGT  51
09-26 The Pep Boys - Manny, Moe & Jack  PBY  503
09-29 American Apparel, Inc.  APP  140
09-29 AMN Healthcare Services, Inc.  AHS  719
09-29 Coty Inc. Class A  COTY  5903
09-29 Loton Corp  LTNR  268
09-29 Lyondellbasell In  LYB  56925
09-29 Protalix BioTherapeutics Inc. PLX  221

> Drugs/Biotech 
- 137
> Banking  - 124
> Business Services - 84

> Banking - 15
> Drugs/Biotech - 14
> Insurance -14
> Manufacturing - 14

> Business Services - 13
> Energy - 13
> Drugs/Biotech - 11
> Manufacturing - 11

> Drugs/Biotech - 51
> Banking - 24
> Business Services - 22
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.
Liberum Research, the independent research firm focused on corporate management change, has developed an online relational database designed to assist institutional investors develop special situation investment ideas related to executive management change. While special situation investing traditionally revolves around corporate restructuring, spin-offs and acquisitions, executive management changes, depending on the circumstances, can represent a short or long-term investment opportunity. 
Liberum's ten year old database offers institutional investors the ability to examine an individual company, sector/s, group of companies, and/or geographic region/s/ locations via a metric of one's own choosing.  You can use the information individually or in combination with a number of other financial tools to develop unique investment ideas.