Royal Bank of Canada chief executive officer Gordon Nixon once said a bank CEO shouldn’t stay in the job longer than 10 years. That was almost 11 years ago.
Now the RBC chief says he’s rethinking that notion, since the average tenure of CEOs is growing progressively longer as companies work to do more long-term planning.
“From an overall market perspective, CEO tenure is getting longer as opposed to shorter. If you looked at the early 2000s, I think the average tenure of a CEO in the United States was somewhere between four and five years,” Mr. Nixon, 55, told reporters after the bank’s annual meeting in Toronto on Thursday.
“To some degree what has been recognized is, if you believe in long-term value creation, that’s way too short a period. It doesn’t allow a CEO or management team to really make good long-term decisions and so forth, so I think the trend is toward longer [tenures]”
However, Mr. Nixon said he’s also started to contemplate life after the corner office, though he’s not planning an imminent departure.
“At age 55, which I hit this year, it would be a good opportunity for me to not only look retrospectively and forward … but also an opportunity for the board of directors to have that option as well,” Mr. Nixon said. “Because you don’t want a CEO to overextend their welcome, if I can describe it that way. So far I haven’t heard any footsteps from the board of directors.”
Sitting to his immediate left as Mr. Nixon said those words at a news conference was RBC chairman David O’Brien, who assured the CEO that the bank’s board wasn’t looking to replace him.
Mr. Nixon, who received $11.17-million in total compensation last year, is the longest-serving CEO of any of the Big Six Canadian banks. He was named to the top job at age 44.
“Gord is unusual in the sense that he came into the job at a very young age. While he’s had a very substantial tenure, he remains in my eyes a young man. So that’s a factor as well, plus his track record,” said RBC chairman David O’Brien.
“The board is cognizant of the issue, and over the next period of time, it could be several years, clearly things will change.”
Mr. Nixon’s time as CEO spans roughly 10 years and seven months, slightly longer than Toronto-Dominion Bank CEO Ed Clark, who has held that job for nine years and three months. Prior to being named head of TD in 2002, Mr. Clark had served as CEO of Canada Trust for about 16 years before it was bought by TD in 2000.
Larry Pollock, head of Canadian Western Bank, Canada’s eighth-largest publicly traded bank, has served the longest of any of his peers. Mr. Pollock, 65, has been CEO of the Edmonton-based lender for 22 years. National Bank of Canada CEO Louis Vachon, 49, is the shortest-serving CEO of the major banks, at four years and nine months.
Although Mr. Nixon once thought a decade was enough, he said he’s not ready to leave the job, given the amount of upheaval in global banking in recent years. “We’re in a very interesting time in financial services there’s a lot of change, there’s a lot of restructuring that’s going on,” he said.
“I’m a great believer that there’s also a right time and a good time in terms of succession planning. And I’m going to try darn hard to pick that time, so it’s not going to be in the near term. We’ll just have to see.”
Gordon Nixon is not the only bank CEO in Canada sticking around, however. The average tenure among the heads of Canada’s Big Six banks is now 7.5 years, which is longer than the global average for CEOs, at 6.6 years.*
Royal Bank of Canada
Time as CEO: 10 years, 7 months
Named CEO: August 2001
Time as CEO: 9 years, 3 months
Named CEO: December 2002
Bank of Nova Scotia
Time as CEO: 9 years
Named CEO: March 2003
Canadian Imperial Bank of Commerce
Time as CEO: 6 years, 7 months
Named CEO: August 2005
Bank of Montreal
Time as CEO: 5 years
Named CEO: March 2007
National Bank of Canada
Time as CEO: 4 years, 9 months
Named CEO: June 2007
*2010 Booz & Co. survey of 2,500 of the world’s largest companies.