[Meanwhile] The question is: Who’s next?
PARK SU-RYONThe author is head of the IT industry news team at the JoongAng Ilbo.
It’s the season of promotions. Today, when new faces get the spotlight, a CEO gets more attention by “stepping down.” Cha Suk-yong, vice chairman of LG Household & Health Care, was the longest-serving CEO in Korea. Having led the company since 2005, he is famous for the “Cha Suk-yong magic,” such as sales growth for 62 consecutive quarters and market cap growth of 44 times during his 14.6 years in office. It is difficult to determine whether he achieved such results because he served so long. But the board has no reason not to keep such a CEO.
But Cha is an outlier. Most CEOs in Korea step down only about 20 percent into their terms. According to a corporate analysis company, the average term for CEOs over the past 10 years is only 3.6 years.
How about other countries? According to global consulting firm PwC, about 19 percent of CEOs at the 2,500 global listed companies held their position for more than 10 years. Their average service is 14 years, three times the overall average of five years.
The problem starts here. The CEOs who succeeded the long-term predecessors were often pushed out before completing their terms: 69 percent of the succeeding CEOs dropped the performance level of their company to the bottom 50 percent group from the top 25 percent group.
The sustainability of a company depends on who comes after a successful CEO or founder. What’s important is whether it is possible to continue to produce CEOs like Cha. The role of the incumbent CEO or the board of directors is to lower the failure rate of the successor and create a sustainable growth structure.
After long contemplating who should take over Apple, Steve Jobs brought Tim Cook to his side. Sequoia Capital found a cold-hearted answer and advised Google co-founders to hand over the CEO position to Eric Schmidt. On the other hand, Meta’s founder has been the CEO of the company so far.
Looking at Korean IT giants today, the level of preparedness for the successors can determine the fate of the companies. Nexon Korea, which has produced CEOs from employees twice in a row, and Naver, which has meticulously prepared generational changes with a CEO born in the 1980s, are considered model cases.
It is too early to evaluate the achievements of these CEOs, but it is important to have a structure that contemplates which entrepreneurs would take over. Does the company you work for or invested in have a system to nurture such entrepreneurs? If you look into that, you may see the future of your company five years or ten years from now.
with the Korea JoongAng Daily
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