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Poll shows rise in CEO mobility

By Wu Yiyao in Shanghai  (China Daily)

13:43, April 19, 2013

Chief executive officers in Chinese companies spend fewer years in office, and have more previous experience in different companies than their international peers, according to a study released in Shanghai on Thursday.

But analysts at Booz & Company, the management and strategy consulting firm that carried out the study, said while CEOs in China could well be more experienced in facing different challenges, the high turnover may also present a risk to companies keen on developing longer-term strategies.

The poll, based on opinions gathered from 2,500 of the world's largest public companies, revealed the turnover rate of CEOs in China last year was 8.1 percent, against a global average of 15 percent.

The average time in office of a CEO leaving a company in China was three years in 2012, against six and a half years in the US and Canada, five years in Japan, and nearly five years in other mature economies.

Sarah Butler, the managing director of Booz's China operation, said its researchers noted that while some companies in China are changing CEOs at a faster pace, there are still others who do view executives as longer-term employees in the hope of maintaining a consistent, stable strategy.

"In the next three to five years, there will be changes to the demands put on CEOs in China, particularly in brand building, marketing and raising levels of innovation," she said.

"Some companies may acquire these extra CEO skills by acquiring other companies, looking at other industries, or cultivating their own."

She added that the findings suggested companies in China are likely to attach more importance to those new areas than profit growth.

The study also found that incoming CEOs to companies headquartered in China have significantly more experience in different companies than their global executive peers.

As many as 93 percent of Chinese CEOs had worked in other companies before being appointed. The figure was 88 percent for companies with headquarters in Western Europe, 86 percent in the US and Canada, 68 percent in other mature economies, and 25 percent in Japan.

Xu Huchu, a partner with Booz in China, added that the increasing turnover rate of CEOs from companies with headquarters in China was the result of the market opening up and the fast growth of the economy, which had enabled executives to be more mobile, get promoted, or choose new employers, giving them better opportunities and options than their global peers.

Zhan Haiyang, a Shanghai-based human resources analysts and headhunter, added: "With broader vision, better education, and more exposure to the global business world, senior managers in China have increased bargaining power when it comes to choosing their employer, and a decreasing willingness to stay with the same company, especially if it is privately owned."

Xu added that the positive side was that companies looking for change, or to boost their performance in the short-term, were able to find people with experience of doing that.

But on the flipside, too high a turnover of leaders may result in short-sighted decisions being made, as well as unqualified individuals being appointed to significant positions, Xu said.

A leading investment consultant in Shanghai said that a CEO's greatest value lies in their ability to give a company direction, change employee mindsets and integrate resources to help companies achieve their goals - a tough task for any senior executive, in a short space of time.

There is also increasing pressure coming from shareholders, he added, if a current incumbent is not up to their standards.

The Booz study found that only 15 percent of Chinese companies hired CEOs with global working experience in 2012.

When hiring new CEOs with global experience, Western European companies stood out, with 60 percent of those polled hiring CEOs who have experience in regions outside their company's headquarters.

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