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Contacts: Doretta Gasorek doretta.gasorek@ratingresearch.com (908) 432-0800 Ashley Burleson ashley.burleson@ratingresearch.com (813) 837-6166 |
Big Changes in CEO Effectiveness Rankings for 2005
Until recently, big pharma was a highly stable industry,
with consistent, sometimes boring returns, strong public support, and
long-tenured chief executive officers. Now there are strong indications
from RRC research and many other sources that things have changed dramatically,
particularly for CEOs.
Looking back over the past three years, only three of the 19 major drug companies
followed by RRC experienced changes in CEO leadership. That has a rate of transition
well below average for corporate America. But it includes the abrupt CEO job
change at Merck in May, an event which is likely to herald a period of increased
scrutiny of CEO quality in the pharmaceutical industry.
For one thing, there were major changes in the perceptions of CEO effectiveness
among the 200-plus industry insiders polled by RRC in 2003, then again in 2005.
Between the two periods, as shown in the table below, more than half of the
companies studied shifted up or down by three or more places in the rankings.
In addition, research conducted jointly by RRC and affiliate Opinion Research
Corporation (ORC) shows an alarming lack of confidence in CEO leadership on
the part of the general public, including investors.
In a recent nationwide poll conducted by ORC, only 43% of the more than 1,000
Americans interviewed said they were confident or very confident that the CEOs
of major drug companies “adhere to ethical business practices.” By
comparison, 59% of the same respondents expressed confidence in the ethics
of CEOs in banking and 55% were confident in the ethical performance of CEOs
of public power companies.
WHO’S NEXT?
The table below may also hold important clues as to which pharma industry CEOs
are best prepared — and which are least well prepared — to survive
in this challenging environment.
Not surprisingly, given Merck’s troubles with Cox-2 inhibitor risk, among
other things, the company suffered the steepest decline in perception of CEO
effectiveness of any of the 19 drug firms covered in RRC’s latest poll
of pharma industry insiders. In the study conducted late last year, Raymond
Gilmartin, then Merck’s CEO, dropped six places in the RRC rankings to
ninth place currently, down from fourth place in 2003.
Among other sharp decliners were CEOs at Bayer and Roche Group, each of which
fell five places in the rankings since 2003 — Bayer to 16th-place out
of 19 companies, Roche to 14th place.
By far the biggest gainer in RRC’s latest poll was the CEO of Abbott
Laboratories, who rose eleven places to eighth-place in the current CEO rankings.
The CEO at Genentech also has reason to feel secure. The firm rose five places
to claim the number one spot in CEO effectiveness for 2005.
Other notable rising stars are CEOs at Eli Lilly and GlaxoSmithKline, each
of which moved up two places in the CEO rankings.
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