Companies search the world and hire at home

02 October 2012 Myriam Robin

In 2005, Telstra hired American businessman Sol Trujillo as CEO.

His reign was a shambles, and led to Telstra’s share price underperforming the market by 20%. In 2009, he resigned, and went on to describe Australia as a racist, backward country.

The Trujillo experiment was disastrous for Telstra, and at the time, many criticised boards for being lured by star recruits from overseas, leading them to overlook home-grown talent.

But our analysis of the backgrounds of the CEOs of the ASX 100 showed that in most cases, this is far from what happens.

When it comes to finding a new CEO, our largest companies overwhelmingly hire at home. LeadingCompany’s analysis of the backgrounds of the CEOs of the ASX 100 showed that of the hundred, 70 were hired from within their company.

The figure includes the seven who founded their own company, as well as the two CEOs who were related to the company founders (Stephen Lowy at Westfield, the son of Frank Lowy, founder and chair; and Katie Page, the wife of chair and founder, Gerry Harvey).

Many internally-appointed CEOs joined the company first as a member of the executive suite, before being promoted up after a few years. They include Paul O’Malley at Bluescope Steel and Chris Rex at Ramsay Health Care.

Of those who weren’t promoted internally, many were CEOs of other ASX100 companies before being brought over. Elmer Funke Kupper was Tabcorp’s CEO before joining the ASX, and Ian Smith headed mining company Newcrest before joining Orica.

This is in keeping with global trends. Last year, the North American arm of global headhunters Heidrick & Struggles analysed the careers of all Fortune 500 CEOs, and found three-quarters were internally appointed. In the UK, the figure is slightly lower but still a majority: in 2007, a study by recruiter Sam Allen found 61% of FTSE100 CEOs were internally appointed.

There are a few things we can take out of these figures.

Firstly, they show that boards and CEOs are succeeding in creating a pipeline of internal succession candidates. This means their companies are less likely to be left in a lurch should one CEO suddenly leave.

It also arguably leads to better leadership: a 2007 study by consultants AT Kearney and the Kelley School of Business found companies headed by internally appointed CEOs had better long-term financial performance than those led by outsiders.

The figures also show boards reward loyalty over external star candidates, at least when it comes to executive leadership.

And thirdly, the figures show boards reward knowledge of their company. This is especially evident when you consider our previous analysis, which found boards often promoted their chief operating officer to the corner office.

Soft leadership skills and generalist skills such as those taught in the Masters of Business Administration might be important, but not so important that they replace solid and comprehensive knowledge of the day-to-day workings of a business.

The takeout is this: if you want to be a high-flying CEO, consider working your way up the one company.

The full list of CEOs is available over the page. For all our ASX100 CEO coverage, click here.

Company	CEO / Managing Director	Internal / External
AGL Energy	Michael Fraser	Internal
Atlas Iron	Ken Brinsden	Internal
Asciano	John Mullen	Internal
Amcor	Ken MacKenzie	Internal
AMP	Craig Dunn	Internal
Ansell	Magnus Nicolin	External
ANZ	Mike Smith	External
APA	Michael McCormack	Internal
ASX	Elmer Funke Kupper	External
Aurora Oil and Gas	Jonathan Kingsley Stewart	Internal
Alumina	John Bevan	External
Bendigo and Adelaide Bank	Mike Hirst	Internal
BHP	Marius Kloppers	Internal
Boral	Mike Kane	Internal
Boart Longyear	Craig Kipp	Internal
Bank of Queensland	Stuart Grimshaw	External
Beach Energy	Reginald George Nelson	Internal
Bluescope Steel	Paul O'Malley	Internal
Brambles	Tom Gorman	Internal
CBA	Ian Narev	Internal
Coca-Cola Amatil	Terry Davis	External
Colonial First State Property Trust	Michael Venter	Internal
Challenger	Brian Benari	Internal
Cochlear	Chris Roberts	External
Commonwealth Property Office Fund	Michael Venter	Internal
Campbell Brothers	Greg Kilmister	Internal
Computershare	William Stuart Crosby	Internal
Centro	Steven Sewell	External
CSL	Brian McNamee	External
Caltex	Julian Segal	External
Crown	Rowen Craigie	Internal
David Jones	Paul Zahra	Internal
Downer EDI	Grant Fenn	Internal
Duet Group	David Bartholomew	Internal
Dexus Property Group	Darren Steinberg	External
Echo Entertainment	Larry Mullin	External
Fortescue Metals	Nev Power	Internal
Fairfax	Greg Hywood	Internal
Goodman Group	Gregory Goodman	Internal
Graincorp	Alison Watkins	External
GPT	Michael Cameron	External
Harvey Norman	Katie Page	Internal
Insurance Australia Group	Mike Wilkins	External
Iluka Resources	David Robb	External
Investa	Scott MacDonald	External
Incitec Pivot	James Fazzino	Internal
JB Hi Fi	Terry Smart	Internal
James Hardy	Louis Gries	Internal
Leighton Holdings	Hamish Tyrwhitt	Internal
Land Lease	Steve McCann	Internal
Lynas Corporation	Nick Curtis	Internal
Mirvac	Nick Collishaw	Internal
Monadelphous	Robert Velletri	Internal
Macquarie Group	Nickolas Moore	Internal
Metcash	Andrew Reitzer	Internal
Myer	Bernie Brookes	External
NAB	Cameron Clyne	Internal
Newcrest Mining	Greg Robinson	Internal
News Corp	Rupert Murdoch	Internal
Origin Energy	Grant King	External
Orica	Ian Smith	External
Oil Search	Peter Botten	Internal
OneSteel	Geoff Plummer	Internal
OZ Minerals	Terry Burgess	External
Paladin Energy	John Borshoff	Internal
PanAust	Gary Stafford	?
Perseus Mining	Mark Galderwood	Internal
Primary Health Care	Edmund Bateman	Internal
Qantas	Alan Joyce	Internal
QBE	John Neal	Internal
QR National	Lance Hockridge	External
Ramsey Health Care	Chris Rex	Internal
Rio Tinto	Tom Albanese	Interal
ResMed	Peter Farrell	Internal
Regis Resources	Mark Clark	External
SEEK	Andrew Bassat	Internal
Sims Metal Management	Daniel Dienst	Internal
Stockland	Matthew Quinn	Internal
Sonic Healthcare	Dr Colin Goldschmidt	External
Spark Infrastructure	Rick Francis	Internal
SP AusNet	Nino Ficca	Internal
Santos	David Knox	Internal
Suncorp	Patrick Snowball	External
Seven West	Don Volte	External
Sydney Airport	Kerrie Mather	Internal
TabCorp	David Attenborough	Internal
Transurban Group	Scott Charlton	Internal
Telstra	David Thodey	Internal
Toll Holdings	Brian Kruger	Internal
Tatts Group	Dick McIlwain	Internal
Treasury Wines	David Dearie	External
UGL	Richard Leupen	External
Westpac	Gail Kelly	External
Westfield	Steven Lowey	Internal
Wesfarmers	Richard Goyder	Internal
Whitehaven Coal	Tony Haggarty	External
Worley Parsons	John Grill	Internal
Woolworths	Grant O'Brien	Internal
Woodside	Peter Coleman	Internal
Westfield Retail Trust	Domenic Panaccio	Internal