It is not hard to see why British Airways should have decided to ditch Bob Ayling. In the four years since he took over as chief executive, BA shares have underperformed their FTSE 100 peers by more than 60 per cent. In the past year alone its price has almost halved. That is partly a reflection of a poor climate for airline operators but, analysts agree, BA's troubles owe a great deal to the Ayling effect. Surely, a change of pilot will allow the shares to take off again.
Not necessarily. An analysis of the record of companies which have abruptly ejected their bosses - a list which includes such luminaries as BP, Barclays, Sainsbury and Rank - shows that a change of manager does not always bring a change in its share price performance.
In the short term, the news is often welcomed. Sackings are often preceded by months of speculation about the chief executive's tenure. The financial performance will have been poor and the company may have lost the confidence of investors and analysts. The prospect of change, any change, is welcomed. The bounce in BA's share price following Ayling's departure is typical.
Within weeks, however, doubts start to creep in. Companies which are reduced to firing their chief executives do not normally have a successor in place. Often the chairman or some other non-executive acts as caretaker until a new appointment is made, a process that can take months. In the meantime the business drifts, key staff can be tempted away and those who remain spend much of their time worrying about their own, rather than the company's, future. The City gets worried and the shares start to drift again.
The appointment of a successor does not always arrest the slide - ask Luc Vandevelde at Marks & Spencer or Matthew Barrett at Barclays. Even if the person recruited is talented and respected, like Sir Peter Davis at Sains bury, they will often have a difficult job simply stabilising the new company before they can start to improve the business. Assuming they succeed - and not all of them will - it can take years before that success is reflected in the share price.
Sainsbury, Rank, Barclays, NatWest and Mirror Group are among companies that have ditched their chief executives in the past 18 months. Of those, the last has since done well, but only because it has merged with Trinity Group.
Barclays is back where it started when Martin Taylor left in November 1998 and Rank has dropped a further 30 per cent since Andrew Teare departed. Going fur ther back, shares in Pilkington are now worth just 40 per cent of what they were, relative to the market, when Paolo Scaroni took over in May 1997.
One of the few exceptions is BP, which has gone from strength to strength since Robert Horton was ousted in 1992. But that was because they already had an excellent insider to take his place, in the shape of David - now Lord - Simon.
The moral is not to get carried away by excitement over a change of boss. Buying on the back of a management change is seldom a sensible strategy. Instead, you should look for well-run companies where the lines of succession are already established.
