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Life is tough at the top. The average reign of chief executives in the UK is just over five years. But the ideal length of tenure is open to dispute.
The rigours of leading a blue-chip company take their toll. A 2013 study published in the Harvard Business Review put the perfect number at 4.8 years. It suggested that executives who spend longer in the job start to focus more on avoiding losses than making gains. Others posit that CEO performance plateaus after nine years.
There are several FTSE chief executives who disprove such theories. Simon Wolfson has led Next for more than two decades. Sir Ivan Menezes helmed Diageo for more than a decade. Roger White, CEO of soft-drink maker AG Barr, is stepping down after more than 21 years.
Total returns during White’s tenure are nine times higher than for the FTSE 250. That is despite the introduction of a UK sugar tax in 2018 targeting fizzy drinks, including Irn-Bru, reputedly “made in Scotland from girders”.
White has expanded AG Barr beyond its Scottish roots via modest but astute acquisitions, such as Rubicon fruit juices in 2008. One key deal escaped him. A bold attempted merger with Britvic in 2012 fell flat after a lengthy competition probe. Britvic then demanded better terms. White would have led the merged business.
Operating margins have dipped recently. AG Barr has not passed on all cost inflation to its customers. It is investing in some smaller brands. Margins fell to 13.6 per cent in the year ending in January, from 14.9 per cent. Investec forecasts a further drop to 11.5 per cent before recovering to a 14-15 per cent range in 2026.
This will benefit White’s replacement. Management studies suggest successors to longstanding CEOs have an above average chance of being forced out.
Debra Crew, Diageo’s new chief, is keen to avoid that fate. Her first set of half-year numbers on Tuesday showed sales improved 6.5 per cent on a like-for-like basis. It is tough running a company for a long time. It is just as tough following such incumbencies.
Listen to Lex deputy editor Elaine Moore talk to creators, companies and critics about the next era of social media in the FT’s new Tech Tonic podcast series