Management Turnover as Change Agent

Liberum Research's latest January 2016 executive turnover numbers show a decline from the rapid growth in turnover seen in December and November 2015.  Nevertheless as a general, January's turnover figures tend to be slower than those registered in the previous months of December and November.  January's turnover numbers when compared to the figures registered in January a year earlier, showed increases in three out of the four key categories Liberum analyzes for its monthly report (see details below).  The overall numbers for January were surprisingly positive when one considers how the stock market has been reacting over the last number of weeks along with growing concerns by numerous analysts and business experts that the American economy could be moving toward recession in the near future.  Liberum contends that continuing strong executive turnover over the last number of months combined with strong employment growth and moderate unemployment continue to point in a positive direction for the American Economy.  

Typically, Liberum's monthly executive turnover figures tend to follow a similar pattern with the U.S. Government's Bureau of Labor Statistics' (BLS) Monthly Employment Report and ADP's Monthly Private Employment Report. The BLS and ADP's latest January Reports were more sober than the numbers for December but overall, they continue to point to strong job growth and consistent rates of moderate unemployment, currently at an 8 year low of 4.9%.  

 

On Wednesday, February 3, ADP released its ADP January Employment Report:

Private sector employment increased by 205,000 jobs from December to January according to the January ADP National Employment Report®

"One of the main reasons for lower overall employment gains in January was the drop off in jobs added at the largest companies compared to December. These businesses are more sensitive to current economic conditions than small and mid-sized companies,” said Ahu Yildirmaz, VP and head of the ADP Research Institute. “Over the past year, businesses with less than 500 employees have created nearly 80 percent of new jobs.”

Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth remains strong despite the turmoil in the global economy and financial markets. Manufacturers and energy companies are reducing payrolls, but job gains across all other industries remain robust. The U.S. economy remains on track to return to full employment by mid-year."

 

 

 

The employment news from the U.S. Government's Bureau of Labor Statistics (BLS) released Friday, February 5, appeared more negative but a close reading between the lines indicates the latest figures were reasonably positive. According to the January BLS Employment Report:

Total nonfarm payroll employment rose by 151,000 in January, and the unemployment rate was little changed at 4.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in several industries, led by retail trade, food services and drinking places, health care, and manufacturing. Employment declined in private educational services, transportation and warehousing, and mining.

Both the number of unemployed persons, at 7.8 million, and the unemployment rate, at 4.9 percent, changed little in January. Over the past 12 months, the number of 

unemployed persons and the unemployment rate were down by 1.1 million and 0.8 percentage point, respectively.

A closer reading of the latest numbers BLS numbers and the circumstances behind them actually point to real progress in the employment numbers.  According to a story by Akin Oyedele in Business Insider right after the BLS announcement:

"Economists had estimated job gains of 190,000 and an unemployment rate of 5%.

Wage growth was stronger than expected. Average hourly earnings rose 0.5% month-on-month. And compared with January 2015, earnings rose 2.5% (2.2% estimated).

There was also a nice surprise from the manufacturing sector, which added 29,000 jobs last month, the most since August 2013. The sector has been hurt by weak global demand and the strong dollar in recent months.

Also, the labor-force participation rate rose to 62.7% from 62.6%.

Overall, and despite the month-on-month slowdown, it's a strong report that shows the labor market is still robust."

 

Bloomberg News also saw positive signs from the latest BLS Jobs report.  According to a story by Christopher Condon, entitled, Fed Can Find Plenty of Positives in Details of Latest Jobs Report,

Taken together, the report was "somewhat hawkish for the Fed, given the move down in the unemployment rate and the move up in wages," Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, said. Feroli believes the Fed still wouldn't raise rates if it were meeting tomorrow.

 

"The report unequivocally supports the Federal Reserve’s (and our) baseline view that further gradual rate hikes are warranted,"  Harm Bandholz, chief U.S. economist at  Unicredit Bank AG in New York, wrote in a note to clients. "A falling unemployment rate and faster wage gains also mean that the Fed is getting closer to meet both of its mandates."

Liberum, despite the growing concerns about a recession in the future and troubles facing the world economy, remains optimistic about the American Economy for the next number of months.  Executive turnover in public companies continues to remain robust and is predicted to continue.  The likelihood of robust executive turnover and ongoing job growth should counteract some of the negative news about recent weak corporate profits and the continuing stock market turmoil in the United States and throughout world stock exchanges.

 

Liberum Comparison Breakdown of Key January Executive Turnover Figure

Below is a breakdown of Liberum's key executive category percentage changes for January 2016 compared with January a year earlier and the previous month of December 2015.   

• January 2015 Compared to January 2016

For January 2016 increases in turnover occurred in three out of four key categories.  CEO changes increased 18% from January a year earlier, CFO changes declined -2%, C-level changes increased 15%, and board of director changes increased 5%, respectively.  

• December 2015 Compared to January 2016

The month to month changes in executive turnover was a reverse, three out of four categories saw declines. CEO changes declined a mere -1%, CFO changes declined -6%, C-level changes declined -22%, while board of director changes increased 16%.              

Below are the overall turnover totals for January 2016.  The information is just illustrative of how institutional investors could view executive turnover and its possible relationship with a company's performance.  Using Liberum's database could offer a totally new perspective on investment and is a potential way to come up with unique special situation opportunities.  Executive search firms can use the information to generate new leads and new clients, and consulting firms can use the data for a variety of analytical purposes.   

Call now (212-988-5497) or email richard@twst.com and get a no obligation one week trial to Liberum's online management change database. Find out why Hedge Funds, Executive Search, Business Intelligence, and Consulting firms all rely on Liberum's data.

 

KEY CEO CHANGES - JANUARY 2016
55 COMPANIES WITH CEO CHANGES WORTH RE-EXAMINING

 

According to Liberum's Management Change Database, a total of 226 CEO related changes occurred during January 2016. Here are 45 changes 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. (Anyone using Liberum's database could do the same kind of analysis for other key titles, e.g., CFOs, COOs, CMOs, CIOs, Presidents, etc.)

DATE  COMPANY TICKER  EXCHANGE  MARKET CAP $ MILLIONS    

Change date   Co name Ticker Market cap01-04 Wipro Limited (ADR)  WIT  NYSE  27500

01-05 National Cinemedi  NCMI  NASDAQ  880

01-05 Spirit Airlines SAVE NASDAQ  2690

01-06 Jetpay Corporation  JTPY  NASDAQ  37

01-06 Ovascience Inc.  OVAS  NASDAQ  231

01-06 Valeant Pharmaceuticals Intl  VRX  NYSE  33280

01-07 Aegerion Pharmaceuticals Inc.  AEGR  NASDAQ  230

01-07 Diamond Hill Investment Group, Inc.  DHIL  NASDAQ  566

01-07 Enerpulse Technology  ENPT  OTC

01-07 IsoRay Inc.  ISR  NYSE  49

01-07 Rignet, Inc.  RNET  NASDAQ  316

01-07 Zosano Pharma Corp  ZSAN  NASDAQ  30

01-08 Freestone Resources Inc FSNR  OTC  14

01-08 Quest Resource Ho  QRHC  NASDAQ  77

01-08 Zaza Energy Corpo  ZAZA  OTC  964646

01-11 BT Group plc (ADR)  BT NYSE  56390

01-11 DuSolo Fertilizers Inc.  DSF  CVE

01-11 Helix BioPharma Corp  HBPCF  OTC  130

01-11 MannKind Corporation  MNKD  NASDAQ  315

01-11 Oncothyreon  ONTY  NASDAQ  159

01-11 Reading International, Inc.  RDI  NASDAQ  271

01-11 UTStarcom, Inc.  UTSI  NASDAQ  82

01-12 Epistem Holdings  EHP LONDON

01-12 Jack Henry & Associates, Inc.  JKHY  NASDAQ  6230

01-12 Nuo Therapeutics,  NUOT  OTC  6

01-13 Publix Super Markets  PUSH  OTC

01-13 USA Truck, Inc.  USAK  NASDAQ  146

01-14 Isle of Capri Casinos Inc.  ISLE  NASDAQ  507

01-15 Cabinet Grow  CBNT  OTC  374256

01-15 Highland Gold Mining Ltd  HGHGF  OTC  246

01-15 OHA Investment Corporation  OHAI  NASDAQ

01-18 Addus Homecare Co  ADUS  NASDAQ  226

01-18 Adidas AG  ADDYY  OTC  19970

01-18 Amec Foster Wheeler PLC AMFW  LONDON

01-18 NOTE AB NOTE SWEDEN

01-19 Zix Corporation  ZIXI NASDAQ  250

01-20 Citrix Systems, Inc.  CTXS  NASDAQ  10370

01-22 Jamba, Inc.  JMBA  NASDAQ  197

01-22 Rcs Capital Corpo  RCAP  SEA  842225

01-25 Redstar Gold Corp  RGCTV  OTC

01-25 Timberline Resources  TBR  VANCOUVER  3

01-26 Wilhelmina Intern  WHLM  NASDAQ  39

01-27 K12 Inc LRN  NYSE

01-27 Perceptron, Inc.  PRCP  NASDAQ  65

01-28 Acorn Energy Inc  ACFN  OTC  5

 

JANAURY 2016 MANAGEMENT CHANGE STATISTICS

C-LEVEL MANAGEMENT CHANGE STATISTICS
GRAND TOTAL - 1,694

TOP INDUSTRY SECTORS

> Drugs- 174
> Banking - 161
> Energy - 143

JANAURY 2016 CEO CHANGE STATISTICS
GRAND TOTAL - 226

TOP INDUSTRY SECTORS

> Drugs/Biotech - 20

> Energy- 20
> Banking - 18
> Metals/Mining - 17

JANAURY 2016 CFO CHANGE STATISTICS
GRAND TOTAL - 220

TOP INDUSTRY SECTORS

> Drugs/Biotech - 24
> Energy - 16
> Banking - 14

JANUARY 2016 BOARD OF DIRECTOR CHANGE STATISTICS
GRAND TOTAL - 487

TOP INDUSTRY SECTORS

> Drugs/Biotech - 75
> Energy - 43
> Banking - 32

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 CFOs 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.