3 Billion Euros - The Value of a New CEO

It happened today. Unilever announced that they have found a new CEO, in anticipation to the foreseen retirement of the current CEO at the end of this year.

In a financial market that was in decline, Unilever was one of the few stocks that climbed 1,23 euros more than 6%. When we multiply this with the number of outstanding shares of the company, we get the value of (about) 3 billion euros.

3 billion of euros is the value of this message. A simple anatomy could look like this.

- The value of a new CEO (60%). People think that a new manager on the steering wheel of a company is able to do what a predecessor could not achieve.
- A possible change of direction (40%). The new CEO comes from another company. In this case the expected change is more profound than if the CEO would come from within the company. It will constitute a change of directions, culture perhaps. Added to this could be the fact that the new CEO comes from the competition, Nestle.

The 40 - 60 percent figures are random.

Those who complain about the excessive revenues of CEO's (the 60 million euros of the CEO of Porsche is often taken as a benchmark) should think twice. Apparently the market values a CEO like this. 3 billion euros is not something to ignore.

Of course it is all speculation, the value is based on expectations (like that of a possible split-up of the company) and with any announced changes, these still needs to be delivered yet.
However a new CEO is valued to what he can do. And one of these things is not even attributable to his arrival but has been valued at forehand: setting new expectations. How he will do it and whether he will deliver doesn't count that much.

H.J.Bool

© Hans Bool

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