Management Turnover as Change Agent

Tuesday, April 7, 2015

March Executive Turnover Defies Weakened Employment Numbers

Last Friday, April 3, the U.S. Government released its job growth and employment numbers for March, and to most analysts' surprise, the totals were quite weak and well below most analysts' expectations.  Liberum Research, which tracks executive turnover in public companies saw the situation a bit differently.  Liberum's North American executive turnover numbers were much better than the U.S. government job growth and and unemployment numbers for March.  While Liberum's March figures were far from terrific, they continued to point in a positive direction for the North American economy particularly the United States economy.  Many experts are now atttributing the government's weak March numbers to the continuing harsh winter.  On Monday April 6, the Los Angeles Times quoted the President of the New York Fed, William C. Dudley when referring to the job numbers as folllows,

"The March labor market report is another indicator that the first quarter is likely to be quite weak," Dudley said in the first comments from a Fed policymaker on the employment data released Friday.

Dudley said the report showed a broad-based slowdown in job creation last month. He added that "it will be important to monitor developments to determine whether the softness in the March labor market report .... foreshadows a more substantial slowing in the labor market than I currently anticipate."  The recent "downside surprises" in key economic data reflect "temporary factors to a significant degree."

His staff found that the effects of snow and winter weather in the Northeast and Midwest were 20% to 25% more severe than the five-year average.

Time will tell but Liberum Research contends Dudley's assessment is correct.  Over the last number of months, Liberum Research has seen a slowdown in executive turnover but as of this point, the slowdown has not been worrisome.  Liberum expects the spring and summer months will show far more improvement in executive turnover totals, and if that happens it will bode well for the North American economy.  

Liberum has put together below, a seven 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, while not consistently, and that trend has continued and Liberum expects it to be about the same for the remainder of 2015.

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 executive changes, get a free trial to Liberum's Online Management 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 over 200,000 data points from which you can generate ideas and daily information on who is changing jobs at the top and where they are going.
Quarterly and Annual Executive Turnover Totals

Below is a simple table outlining the quarterly and annual turnover totals as registered through Liberum Research's Management Change Database for 2008 through the first quarter of 2015 for CEOs, CFOs, and overall C-level turnover.  

 Total CEO Turnover Comparisons   
 Year 2008    2009 2010 2011 2012 2013 2014   2015    
1st Quarter 745491 388346 680 583 500  522
 2nd Quarter596 380321 581665 619 527 
 3rd Quarter533409298713 636 627 557 
 4th Quarter461430328697 673 636651 
 Annual Total2,3351,7101,3352,337 2,6542,465 2,235522 

 Total CFO Turnover Comparisons 
 Year 2008    2009 2010 2011 2012 2013 2014   2015 
1st Quarter 593 332 296 280 640 495  468513 
 2nd Quarter551 326 273 404612 557   595  
 3rd Quarter438 279 256629 598582  550 
 4th Quarter364 313  258   476569562 586  
 Annual Total1,9461,250 1,0831,789 2,4192,196 2,199 513

 Total C-level Turnover Comparisons
 Year 2008    2009 2010 2011 2012 2013  2014   2015  
1st Quarter 6735 4061 34532863 5442 3971 4083  3923
 2nd Quarter7430 5051 3199 404150364102 4117  
 3rd Quarter4865 3690 25225349 423541233950  
 4th Quarter4277 3439  2381   4596 419741964200  
 Annual Total23,307 16,241 11,55516,849 18,91016,392 16,350 3,923

The latest monthly comparison figures with regard to executive turnover for March 2015 as compared with those of March 2014 and March 2015 and February 2015 are as follows:  
  • CEO turnover for March 2015 showed a 10% increase over that of March 2014, CFO turnover increased 2%, C-level turnover declined 8% and Board of Director turnover declined 23%.  
  • The the month to month change from February 2015 to March 2015 overall was somewhat more positive. CEO turnover increased 20% for CEOs, increased a huge 43% for CFOs, increased 5% with regard to C-level changes but declined 8% for Board of Director changes.  
In the below report, Liberum has focused on 32 CEO changes of special significance for the month of March out of a total of 180. We have also put together the overall turnover figures for the month of March 2015.  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 Liberum's Management Change Database.

03-02 Api Technologies  ATNY  NASDAQ  114
03-05 Centrus Energy Co LEU NYSE 38
03-09 Credit Suisse Group (ADR)  CS  NYSE  39780
03-10 American Realty C ARCP  NASDAQ  8930
03-10 Epcylon Technolog PRFC  OTC
03-10 Tag Oil Ltd  TAOIF  OTC  67
03-11 ACADIA Pharmaceuticals Inc.  ACAD  NASDAQ  3340
03-11 Prudential Financial, Inc.  PRU  NYSE  37380
03-11 Sanchez Production Partners LP  SPP  NYSE  54
03-13 Blue Square-Israel Ltd. (ADR) BSI  NYSE  185
03-16 Madison Square Ga   MSG  NASDAQ  6110
03-16 Sotheby's   BID  NYSE  2830
03-16 Stoneridge, Inc.  SRI  NYSE  319
03-16 Visteon Corporation  VC  NYSE  4280
03-17 Agritek Holdings  AGTK  OTC
03-17 Charles & Colvard, Ltd.  CTHR  NASDAQ  25
03-17 Corinthian Colleges, Inc.  COCO  OTC
03-18 Medical Marijuana  MJNA  OTC  60
03-18 TreeHouse Foods Inc.  THS  NYSE  3650
03-19 Acelrx Pharmaceut  ACRX  NASDAQ  178
03-19 Seaworld Entertai  SEAS  NYSE  1720
03-20 Cockatoo Coal Ltd  CKATF  OTC  1680
03-20 On4 Communication  ONCI  OTC  59502
03-23 Halfords Group Adr  HLFDY  OTC  1280
03-23 Neutral Tandem, I  IQNT  NASDAQ  544
03-24 Midstates Petrole  MPO  NYSE  62
03-24 Rocket Fuel Inc.  FUEL  NASDA  395
03-25 Blonder Tongue Labs, Inc.  BDR  NYSE  11
03-26 Align Technology, Inc.  ALGN  NASDAQ  4400
03-26 Sagent Pharmaceut  SGNT  NASDAQ  768
03-30 State Auto Financial   STFC  NASDAQ  997
03-31 Gen Employment En  JOB  NYSE  27

> Drugs/Biotech 
- 125
> Banking  -78
> Business Services - 71

> Drugs/Biotech - 20
> Business Services -13
> Energy - 12

> Drugs/Biotech - 12
> Food - 10
> Health Services - 10

> Drugs/Biotech - 45
> Energy - 24
> Banking - 23
> Health Services - 23
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 over 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.  

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