Chief executives held accountable for underperformance

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The survey of investors found that 25% of participating UK firms had actively contributed to a chief executive's departure in the last year. Among Australian investors the figure was 37%, while the global figure was 15%.

The proportion saying that they had at least moderate influence on companies in which they invested rose in several countries in the last year. In the UK it increased to 80% from 71%.

Simon Bartholomew of Russell Reynolds said: &quotThe newly appointed ceo today has two years or less to deliver results, even when the challenges facing the company may have been years in the making.&quot

He added: &quotIn a bull market, investors may overlook shortcomings in ceo or board performance, but in bear markets investors take a much more critical attitude. Recent events in the UK such as the M&S shareholder revolt and the poorly received attempt by Marconi to reissue share options are evidence of investor impatience.&quot

The survey found that 83% of institutional investors worldwide believed that severance packages paid to underperforming ceos were excessive, and that boards should impose strict limits. Among UK investors the figure was 94%.

Over half the investors questioned (56%) said that big pay-offs worked against the best interests of the business. Around 50% argued that having a safety net undermined ceos' motivation to perform and could shorten their tenure in the job.

The two most important criteria used by investors to judge a ceo are the financial record of a company (70%) and its performance versus competitors (50%), the survey found.

Bartholomew said: &quotIt's tough at the top and tenure is getting shorter. In addition to financial performance, investors are now focusing on the ceo's ability to create and retain a strong team. Evidence to the contrary is increasingly seen as a strong indication of poor performance.&quot

The survey was conducted by Wirthlin Worldwide, an opinion research organization, on behalf of Russell Reynolds. It covered institutional investors in Australia, Canada, France, Japan, the UK and the US.