24 April 2016
Global study found the kingdom has moved many senior executives into government positions.

The year 2015 was one of change for many senior company officials in Saudi Arabia, which witnessed the highest rate of executive replacements in the Middle East, according to the latest CEO Success Study.

The study, which surveyed the largest 2,500 listed companies in the world, found that across the globe 17 percent of these firms replaced their chief executive officer (CEO) last year, the highest figure for 16 years.

In the Middle East the average figure was 21 percent, except for Saudi Arabia where the rate jumped to 38.5 percent, or double the global average, according to the study compiled by research firm Strategy&, part of the PwC network and which was issued oh April 21.

"This growing trend is mostly due to recent political and economic movements, including a recent change in the country's leadership and ongoing oil price volatility, which has led to a shift in how Saudi Arabian leaders think about, approach and successfully execute the new agenda of the country and where several private sector CEOs have taken on Ministerial or other senior roles in the government," Per-Ola Karlsson, Middle East partner at Strategy&, said in a press statement.

The most high profile example of the move from the private to public sector was Khalid Al Falih. King Salman appointed the CEO of Saudi Aramco, the world's largest oil company, as new health minister last year in April. Falih, who has been with Aramco for 30 years, remains chairman of the oil giant.

Al Falih was not the only high performing private sector senior executive to be lured into the government. Majed Al Hogail, the former managing director of privately-owned property firm Rafal Real Estate Development Company, was chosen to head the housing ministry by the Saudi monarch.

The kingdom's new agriculture minister, Abdulrahman Al Fadhli, was previously head of Almarai, the Gulf's biggest dairy producer, Culture and Information Minister Adel Al Turaifi was general manager of the Al Arabiya news channel and Economy and Planning Minister Adel Fakieh also previously served as chairman of food company Savola.

New blood

The change in senior personnel at major Saudi companies comes as the kingdom struggles to cope with the sharp drop in oil prices and a challenging fiscal outlook. Riyadh ran a deficit of 367 billion riyals ($97.9 billion) last year, or 15 percent of gross domestic product (GDP), Reuters reported in December.

At the same time, the Saudi stock market has declined nearly 30 percent in the last 12 months and the government budget and GDP growth figures for 2016 are set to be even more pessimistic.

With oil accounting for 73 percent of government revenues and the price continuing to remain low, analysts will be looking to how many more top companies decide to bring in new blood at the top.

In the Middle East over the last four years, 58 percent of all newly appointed CEOs were hired from outside the company, up from 33 percent in the previous four year period.

"These high succession rates, coupled with a need to improve regional corporates' leadership development practices, limit companies' ability to fully develop internal leaders to their full potential, enabling them to effectively take on the CEO role," Karlsson said.

(Writing by Shane McGinley)

© Zawya 2016