The sudden ouster of Unilever CEO Hein Schumacher less than two years after his appointment is in line with a growing trend of a shorter shelf life for chief executives. Data shows as many as 43 CEOs of the world’s largest listed companies departed within 36 months of taking the job last year — the highest since 2018 — due to activist investor pressure, according a report in the Financial Times. Another research study says the average CEO tenure has decreased by 34% since 2017. In fact, there has been a sharp 30% increase in the number of CEOs with tenure less than one year and an equally sharp 30% decrease in the share of CEOs with a tenure in the 10-20-year range. In Unilever’s case, the board, which includes activist investor Nelson Peltz, apparently grew impatient with the pace of his turnaround plans.
Schumacher had planned to hive off the ice-cream business — and list it in Amsterdam rather than the US that Peltz preferred — drop underperforming brands, and slash 7,500 jobs. That task has now been entrusted to Fernando Fernandez, who was the chief financial officer at Unilever, as the board chairman felt that he had a results-oriented approach and ability to change at speed. Interestingly, Schumacher was ousted despite showing strong financial progress. Unilever’s scrip was up by 9% since his appointment although it trailed rivals like Procter & Gamble.
Activist investors have grown impatient not just with underperformance but also with woke agendas of CEOs who espouse sustainability, diversity, equity, and inclusion objectives. To be sure, this wasn’t their problem with Schumacher as he in fact undermined the larger message of sustainability advocated by his illustrious predecessors to address the imperatives of climate change. The far-sighted leadership of Paul Polman, who led from 2009 to 2019, and his successor, Alan Jope, doubled down on purpose in accelerating climate change actions within Unilever’s operations and the wider value chain. Schumacher instead adopted a more “realistic approach” and fewer sustainability targets for the use of virgin plastics and circular packaging, for instance. Under his watch, Unilever announced last year that it was introducing a more “focused “strategy as the sustainability targets set by his predecessors were simply not achievable. He even changed the company tagline established by Polman “to make sustainable living commonplace” to “brighten everyday life for all”, and merged the functions of sustainability, corporate affairs, and external communications under one leadership role. The direction that Schumacher wanted for Unilever clearly had the support of Peltz.
The abrupt exit of Schumacher, who was only the second outsider to helm the consumer goods conglomerate, also reignites the debate over the growing preference for insiders to helm companies. Only last year Nestlé installed company veteran Laurent Freixe at the top, replacing external hire Mark Schneider. With a 40-year stint at Unilever, Fernandez was perceived by the board to have a better grip as he has considerable experience running the beauty business and working in emerging markets, which is indeed a priority focus for the company. The question, however, is whether just 20 months were enough for a CEO to solve everything in a company that still has an unwieldy structure. The upshot is that these are indeed difficult times for CEOs of leading global companies, who are having relatively short tenures to turn around their firm’s performance due to intense scrutiny by activist investors.