What's going on?
There’s change at the top of iconic American car company Ford: it replaced its CEO on Monday following its stock’s poor performance (tweet this) – but investors are still awaiting the details of how its new leader will change things up.
What does this mean?
Ford’s share price has fallen almost 40% in the three years since its departing CEO took over and, reportedly, the board felt shareholders had weathered enough pain. He is being replaced by Jim Hackett, who was previously the CEO of a major office furniture company and spearheaded the turnaround of the University of Michigan’s football team (a big deal in America…). Ford’s board appears to believe that he will “sharpen operational execution” (read: make Ford more profitable).
Why should I care?
For markets: Investors aren’t (yet) that impressed.
Ford’s share price jumped a little over 1%, a marginal gain indicating that investors don’t (yet) view this appointment as an indication of a transformative turnaround. Ford appears likely to do some things in the short term to please shareholders, namely increasing the amount of stock it buys back (which helps push up its share price). But apart from, perhaps, a bit more optimism around operational efficiency and some short-term initiatives, investors haven’t been given much to chew on (like, for example, how its investment in self-driving cars might change).
The bigger picture: It’s times like these that investors may rue certain shareholders having special voting rights.
Despite its size, Ford is still in many ways a family business: Henry Ford’s great grandson is the chairman of the board and the Ford family owns about 40% of the company’s voting stock (despite owning less than 2% of the company – yes that’s possible). Facebook and Snapchat are examples of other companies where founders have maintained voting stock in excess of their ownership. Investors tend to be ok with this setup until things start going wrong – and they then question the decision-making of those with enhanced voting power.