Doing the CEO shuffle

Companies are bringing new blood into their head offices when they expand, submit to increased federal oversight or become impatient with less-than-stellar financial performance

So far this year, nearly a dozen companies in the Triangle have hired new CEOs.

Nationwide, the picture is similar: 859 companies had ousted their CEOs as of May 23, according to Liberum Research in New York, which gathers data about executive changes at public companies. That number is right in line with the pace last year, when 2,743 companies got new CEOs. That was a 30 percent increase over the previous year.

Many blame Sarbanes-Oxley, the legislation passed in 2002 that requires more corporate governance and holds boards and CEOs more accountable.

"CEOs are feeling a lot more pressure in the past five years," said John Graham, a finance professor at Duke University's Fuqua School of Business. And because boards and companies are scrutinizing CEOs more closely, they are more likely to uncover poor performance and force them out, he said.

"It's gone from this informal feel to a stricter process with much more structure," Graham said.

In the Triangle, that kind of pressure has made it harder for some companies to find a CEO.

Etrials, a Morrisville company that develops software for experimental drug testing, hired an executive recruiting firm to help with its search. It started with a pool of about 100 candidates that was narrowed to four over several months. In May, Eugene "Chip" Jennings was hired away from SHPS, a Kentucky health-care services company.

During early interviews, many executives backed away from the position when they realized that Etrials was a public company, said John Cline, the former CEO, who was involved in the search for his replacement.

They didn't want the increased liability that comes with running a public company, Cline said.

"We now want CEOs to grow the company, lead the people, make a profit and, by the way, make sure to comply with all the Sarbanes-Oxley regulations," he said.

Paul Conway of Raleigh executive firm Conway & Greenwood agreed that the pressure on CEOs has increased.

"They have to stand on their own merit," he said. "There is less cronyism. It's all about profitability."

Misys Healthcare Systems announced the resignation of its CEO, Tom Skelton, on the same day that the CEO of the company's London-based parent called the health-care division's financial performance "unacceptable." Roger L. Davenport is now in charge of the Raleigh business. Skelton's job carried the CEO title, but Davenport's doesn't. Instead, he is executive vice president and general manager of the healthcare business.

At Oasys Mobile, a Raleigh company that provides ring tones and games for mobile phones, the former CEO and marketing executive left because of poor performance, said Bernard Stolar, lead director of the board.

'Get a little dirty'

"There are guidelines to running a business. If you don't follow them, you deserve to lose your job," Stolar said.

The problem, Stolar said, is that some CEOs just can't roll up their sleeves and get a little dirty.

"It's no longer about playing golf. ... We have become a more service nation rather than a manufacturing nation," he said. "The ability of ... [the CEO] to access and gather information is critical to make decisions and know how to compete."

In December, Oasys hired Doug Dyer as its new CEO. Dyer came from ROK Entertainment Group, where he was acting CEO of the global company that sells video and media content to wireless devices and mobile phones.

Private companies are also holding top leaders more accountable, said Marc Lewis, a spokesman for Leadership Capital Group, an executive recruiting firm in Connecticut.