CEO and top executive shake-ups at large corporations is always something that we keep an eye on. Whether it’s a dark horse candidate taking the helm, or an industry veteran heading out, these changes can be meaningful for the future of the company, and impactful from an investors’ standpoint. For example, let’s rewind to 2011 and examine Ron Johnson’s appointment as CEO of JC Penney. During his 17 month tenure, his forward thinking ideas and initiatives were aggressive, and the average shopper didn’t embrace the pricing and merchandise model. In an effort to attract a higher level shopper, Johnson alienated core customers, taking too big of a swing and suggesting that he didn’t necessarily understand the business.
From an investing standpoint, this shakeup and large philosophical business shift should have been a red flag. In 2014, we have seen some major company changes in the industry (although nothing quite as negatively notable as the Johnson/JC Penney example). Below, we highlight some of the biggest industry shake-ups this year, and what it might mean moving forward.
February: Satya Nadella becomes Microsoft’s third CEO
Earlier this year, Satya Nadella took over CEO reigns from Steve Ballmer, in an interesting move given his dark horse candidacy. Microsoft is a complicated company, as they have a lot of cross pollination between divisions, so we think it was promising to bring an insider into the C-suite. The company needed a visionary with respect to technology, and Nadella has already proven himself – placing an emphasis on business customers and moving products toward the cloud. He has a holistic view, and is definitely moving Microsoft in the right direction.
September: Bill Gross leaves PIMCO for Janus
In what might have been one of the more surprising shake-ups this year, Bill Gross, co-founder of the Pacific Investment Management Co., left the investment management giant and headed for Janus Capital Group. The move has been disruptive to the mutual fund world, and it will be interesting to keep an eye on both companies over the short-term. While some investors might follow Gross and invest in his new Janus Unconstrained Bond Fund, it is unlikely to see a significant and direct shift. Performance had been dwindling at PIMCO, and money had already begun to shift out of company prior to Gross’ departure.
September: Larry Ellison and the Oracle redirect
Last month, Larry Ellison, CEO of computer technology corporation Oracle, decided to step down, relinquishing his CEO responsibilities and opting instead to stay on board as a Chief Technology Officer. The interesting move here is that the CEO role will be split between Mark Hurd and Safra Catz. Given their past roles (both sharing power as co-presidents for the last four years), we will see if these two can truly exist in a CEO alliance.
October: Abigail Johnson moves up the (family) Fidelity ranks
Most recently, Abigail Johnson was announced to take over Fidelity’s CEO role from her elderly father, Edward Johnson III. Over the last few years, it seems that Abigail was garnering more responsibility, so this shift should not come as a total surprise. Of course, investment and overall business philosophies will be similar between the father-daughter duo, and since the Johnson’s understand that investors’ demand continuity, do not expect to see dramatic change from the company over the short- or long-term.
All four of these examples show a sense of continuity, in that no company is really doing a 180 in regard to changing the scope of their business or brand. When a company changes leadership, it is important to look at whether the new CEO is leading the business in the right direction and driving initiatives forward. 2014’s movers and shakers seem to have learned a lesson from Ron Johnson, because after all, you do need change, but you don’t need a revolution.