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Editor’s letter: In praise of the time-servers

We wonder if the same is true of finance directors. Our FD performance survey
on pages 39-44 looks at the total shareholder returns (ie, change in the share
price, plus reinvested dividends) generated during the time that each FTSE-100
company’s FD has been in the job (and compares that with the returns generated
by the market as a whole over the same period).

One thing we can safely conclude is that, if you’ve been in the job for a
long time (and 4.4 years is the average for FTSE-100 FDs) then it’s very
unlikely that you’ve been destroying shareholder value. Of the 40-odd FDs who
have been in situ longer than that, barely 20% have witnessed a destruction in
value. But for the 60-odd who have been FD with their current company for less
than 4.4 years, the chances are twice as high – 40% – that they have been
sitting on an underperforming share price or meagre dividend payout ratio.

It’s valid to ask the question whether shorter tenures have any impact on
corporate performance. One interpretation is that FDs – and CEOs, for that
matter, and probably other senior managers – have their eye on their careers
more than on their jobs, with the result that they manage to get themselves
headhunted before having to be held accountable for some of the longer-term
strategic decisions they’ve made.

That’s probably an uncharitable view, however. Most FDs we’ve met profess
(convincingly) not to plan their careers with any great care. More likely is the
scenario in which an FD gets their feet under the desk, learns where the levers
are, pulls a few of them, leaves others alone, starts to look at what happens as
a result and… – the phone rings and it’s a headhunter purring down the line
promising untold wealth and column inches on the front page of the FT. Then it’s
left for someone else to get their feet under the desk, find out where the
levers are…

You can’t – and shouldn’t – rein in ambition. But after doing this survey it
seems to us that the FDs who have generated the most value are those who have
done things, changed things, sometimes messed things up, learned from that,
tried something else, got it right, taken the company to the next level… In
other words, they have been as ambitious for their own company as they have been
for themselves – and their shareholders have benefited hugely from that
experience and commitment.

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