Is exodus of young executives driven by generational clash in boardrooms?

Many of the executives who have left their high profile positions, however, maintain that their exits were mainly driven by having successfully accomplished key targets such as success in execution of turnaround or success in implementing change of strategy.

Management experts beg to differ, arguing that the high turnover of young executives from companies whose boards are dominated by significantly older directors may well be driven by generational differences around decision making, strategic outlook or execution of strategy.

Recent reshuffles have seen Wanjiku Mugane leave the board of East African Breweries Limited barely a month ago.

Two years ago Ms Mugane, who heads the East Africa operations of First Africa Capital, and who has over the past decade emerged as a key deal maker across the African continent, heavily involved in arranging debt and offering guidance on mergers and acquisitions, quit as a director at Equity Bank.

Early last year, Mr Tony Wainaina, former CEO of TransCentury, announced he was leaving the company to pursue other interests in the venture capital industry––a revelation that took corporate Kenya by surprise. Months later, Mr Mugo Kibati quit as the group CEO of East African Cables after a high profile successful run at the company.

In October, Mr Peter Mwangi unexpectedly resigned from his position as managing director of Centum Investment, one of the oldest and largest investment companies in the country.

The 39- year- old engineer joined the Nairobi Stock Exchange a month later as CEO, replacing yet another young executive, Mr Chris Mwebesa, who moved to head CfC Stanbic Financial Services.

In December, Mr Paul Kavuma quit as the head of private equity at Actis East Africa.

Boardroom politics
Management experts predict that more changes are in the offing especially given the current weakened state of the economy.

“Generational conflicts are so real in boardrooms,” says Dr Caesar Mwangi, the managing director at listed agricultural firm Sasini. “Due to diverse backgrounds, different levels of exposure and varying experiences, people are fundamentally different, and it’s the understanding of these differences that keeps the boards going, ” said Dr Mwangi.

Proponents of the generational conflict theory argue that the younger executives tend to be independent-minded and revolutionary and are therefore often seen as troublemakers.

These traits put them on an inevitable collision course with the much older, more conservative crop of directors who still in large part dominate boardrooms in Kenya, leading to the eventual fallouts.

But the high turnover at the top could also be triggered by other factors such as the desire to change career paths or the ongoing talent wars between firms.

According to Ms Mugane, who insists she quit the two high profile board positions for personal reasons not due to her older colleagues, “board dynamics have a lot to do with the experience one has and not necessarily age differences.”

A slow down in earnings in the wake of the weakened economy is also increasingly placing executives and their boards on a collision path, raising the prospect of fallouts that will see a number of CEOs bowing out voluntarily or being dismissed.

Some board sources support management experts in their assertion that generational conflict, board politics and shareholder pressure are the key reasons directors and chief executives are being forced out.

Other executives, notably those who have moved on to new roles, differ.

“You need creative tensions in boards and these need not necessarily have to lead to conflict,” said Mr Kibati, who is now heading Miliki Ventures, a private equity firm.

“Differences will always occur due to differences in backgrounds, experience and age. Different people bring varying perspectives into the board.”

According to Peter Mwangi, now chief executive of the NSE, “People of different ages and generations will always disagree but,” he is quick to add, “that’s not to say this is the reason why I quit Centum.”

He does however concede that “in boardrooms, you disagree over very many things and sometimes this causes fallouts.”

In fact, says Mr Kibati, “Boards are increasingly bringing in more young people than those leaving.”

Over the past few years, a tremendous amount of attention has been devoted to improving corporate boards.

New regulations, along with pressure from big investors, have forced companies to tighten their definition of independence and to appoint more independent directors who have no direct connection to the company.

“Pressure for good governance is forcing boards to be more professional leading to younger more educated executives entering boardrooms on their professional strength,” says Dr Jennifer Riria, chief executive of the Kenya Women Finance Trust.

Companies themselves have tried to draw from a wider pool of candidates and boards are increasingly becoming more demographically and professionally diverse.

Complex environment
“There is a realisation that the environment is becoming more complex and therefore there is a recognition of the need for people with energy and know-how to serve in boards, ” said Dr Mwangi.

However, according to a new global report by PriceWaterhouseCoopers and the Economist Intelligence Unit, diversity at the highest level of a company can take time to develop.

An analysis of 40 leading global companies showed that only 15 have executives from emerging markets on their boards, just marginally greater than in 2003, despite the rising importance of these markets.

“On the other hand,” says the report, “there has been progress in terms of gender diversity on the boards of retail and consumer companies globally.”

“In 2003, nine out of the 40 companies did not have female presence on the board. In 2008 only two did not.”

The report also says that there are 50 per cent more women in total on the boards of these retail and consumer products companies in 2008 than there were in 2003.

These changes are taking place at a time when boards are becoming more forceful and demanding, a sharp departure from the past when most boards were mere rubbers stamps of management decisions.

“Boards are more active than they have ever been before, and more willing to show underperforming CEOs the door,” said the Sasini managing director.

There has therefore been a corresponding increase in pressure on CEOs to deliver on key measures of success.

Institutional-investor pressure in particular has intensified, forcing management to show results in the increasingly competitive environment wrought by globalisation.

Leaders wanted
With the economy showing little sign of recovery after growth more than halved last year, management experts and executives reckon that business managers will be forced to rely more on individual company strategy than on riding the fortunes of a robust economy to jump-start their growth.

According to management experts and practitioners, the demand for sound leadership has increased in recent years both in politics and in business as organisations have become more complex and there has been increased pressure for transparency and accountability.

[email protected]