- CEO replacements on track to test Swedish record set in 2015
- Boards becoming unusually blunt in tone of executive firings
Corporate Sweden is replacing chief executive officers at the fastest pace in at least a decade, underscoring the fate that top directors face if they fail to satisfy increasingly hard-to-meet shareholder demands.
Of Sweden’s 50 biggest companies, seven have parted with their CEOs so far this year. That follows 12 last year, which marked the highest number since at least 2007, according to Bloomberg calculations. By comparison, about four top executives were replaced, on average, each year between 2007 to 2014.
“There’s been a trend for a number of years that the burn time of CEOs has become shorter,” Lars Milberg, chair of the Swedish Shareholders’ Association’s corporate oversight board, said by phone. “There may be less patience, and financial players are expecting quicker returns.”
This year’s wave of firings has been notable for the harsh, and often personal, tone of the statements announcing the news. There’s been little effort made to suggest executives had expressed a desire to spend more time with their families. Instead, boards have pulled no punches in listing the inadequacies they say forced them to act, often before having lined up a replacement.
When Svenska Handelsbanken AB unexpectedly sacked Frank Vang-Jensen last week, Chairman Paer Boman said the job had simply been “too hard” and “too big” for the 48-year-old. Vang-Jensen will walk away with up to 19 million kronor ($2.3 million).
At Swedbank AB, Michael Wolf lost his job after the chairman said he was suspected of insider trading. Wolf, who got 75 percent of his $1.5 million salary, was subsequently cleared, and the chairman has since lost his job.
Life at the top can be cruel, and the dismissals haven’t given rise to many expressions of sympathy.
Being a CEO is a little like being a top footballer, according to Martin Guri, chief analyst for equity strategy at Nordea Bank AB in Stockholm. “No one can stay on and lead the team forever and rest on their laurels if the results are absent,” he said in an e-mailed response to questions.
Milberg is equally unsympathetic. “The price of mediocrity has been far too high” at some companies, he said, without commenting on specific firms.
Not all the dismissals are meeting with investor approval. Wolf’s firing led to a 5.7 percent share drop at Swedbank the day it was announced in February.
This week, shares in Getinge AB sank as much as 6.3 percent after the maker of sterilization systems for hospitals suddenly got rid of Alex Myers, who was CEO less than 18 months. Board Chairman Carl Bennet, who is also Getinge’s largest shareholder, said Myers’s “different views” meant he couldn’t continue.
Myers was the sixth CEO to be explicitly fired from one of Sweden’s biggest companies since the beginning of last year. Some top executives have managed to avoid tongue lashings from their boards. Electrolux AB CEO Keith McLoughlin was able to cite family reasons when he resigned, though the announcement came not long after the appliance maker’s 15-month pursuit of General Electric Co. ended in fiasco.
Ericsson AB fired Hans Vestberg in July, and now Swedish media are speculating that the chairman, Leif Johansson, might be next. The company’s shares have slipped about 4 percent since. McLoughlin and Vestberg were the two highest earning CEOs based in Sweden last year, according to data from Novare Pay Consulting.
According to Carina Lundberg Markow, head of responsible ownership at Swedish insurance company Folksam, boards are sometimes to blame for bad CEO choices and subsequent dismissals. They would do well to rely more on external experts before making a choice, she said in an e-mailed response to questions.
The restless environment that seems currently to be gripping board rooms might also sow the seeds for better corporate governance in the future.
“It’s good if the turbulence brings more efficient ways of leading companies, because that will be needed,” she said. “However, the road toward that goal could be rather bumpy.”