I'm backing the young-gun CEOs

I strongly believe that the sporting analogy "if you're good enough, you're old enough" also applies to the business world.

Until very recently in the listed, large cap Australian corporate sector there was clearly "age biased" in the selection of chief executives. Boards always seemed to go with the "safe" candidate, who was usually over 50 years of age and had most likely worked for a decade inside the company. They were usually the second in line, usually had "done their time" and then, amazingly, after a "global search" the right candidate was discovered right under directors’ noses. It was a very predictable process until very recently.

There is no doubt in my mind the BHP board's selection of Marius Kloppers as chief executive has started the trend of Australian boards finally taking some perceived "higher risk" decisions when it comes to CEO succession.

Let's face it: while people like me who knew Kloppers’ talent and drive were publically writing that he was the right candidate to take over from Chip Goodyear, I was never certain the BHP board would take the perceived risk on him at the young age of 43. But the board did recognise that he was the best candidate – internal or external – and appointed him over other internal candidates who the market considered "next in line" and some very serious external candidates.

Quite frankly, Kloppers was a "ballsy" decision for the BHP board to take but as last week's record BHP result shows he absolutely was the right choice. This was a first-class set of numbers and he presented with the confidence and knowledge base of someone who has been in the job significantly longer than he has. You may think I am biased, but I am convinced Kloppers will be the best thing that ever happened to BHP and total shareholder returns.

BHP is a "trendsetter" by its own deliberate actions and by default. As Australia's largest company and global torchbearer for Australia, it must conduct itself in a manner that is beyond reproach. It must set the benchmark in disclosure and transparency. Yet, because of its size it will by default set trends that others in corporate Australia follow.

I remember clearly when Kloppers was appointed I had numerous calls from other company directors intrigued about the decision. They were firstly surprised that BHP "would pick a 43 year old"; secondly "one they had never heard of"; and thirdly "that the board took the risk". I can remember being asked "does chairman Don Argus really know what he's doing here?" and "is Kloppers a good as you say he is?"

A genuine "young gun" can totally change internal culture. If you want to break an institutionalised culture you need to turn reporting lines on their head and force the exit of those overlooked for the top job.

Who is this bloke?

A few weeks ago Qantas chairman Leigh Clifford, 60, announced that long-serving chief executive Geoff Dixon, 68, would be replaced by Alan Joyce, 42, the head of Qantas subsidiary Jetstar. To show you what a surprise this would have been to senior incumbent management at Qantas, I went to its website and downloaded the "executives" list. There were plenty of qualified candidates other than Joyce – and plenty older – but the Qantas board went with the "ballsy" young choice.

Here’s the list: Geoff Dixon (chief executive officer); Peter Gregg (chief financial officer and executive general manager, strategy, who has since resigned); John Borghetti (executive general manager, Qantas); Kevin Brown (executive general manager, people); David Cox (executive general manager, engineering); Curtis Davies (executive general manager, services); Grant Fenn (executive general manager, freight enterprises); David Hawes (group general manager, government and international relations); Simon Hickey (executive general manager, loyalty); Brett Johnson (general counsel); Alan Joyce (chief executive officer, Jetstar); Rob Kella (chief risk officer); and Colin Storrie (deputy chief financial officer).

Is Joyce really a "ballsy" choice? All the checking I have done with airline industry contacts says he is an absolutely first-class operator. He is an airline guy through and through, with his knowledge base hewn in the extremely tough budget airline industry. He has turned Jetstar from a start-up to arguably a better brand that Qantas right now (not in terms of brand recognition globally, but in terms of perceived value, on-time service and safety). He's done a great job with Jetstar and he's been given the job to reinvigorate the tired Qantas.

From what I understand, Jetstar was always a bit of a laughing stock inside Qantas circles. The long-time Qantas employees looked down on their subsidiary somewhat, as some sort of poor cousin. The joke is now on them as Jetstar thinking starts to work its way into the Qantas culture under Joyce, and I think that is probably the best thing that has happened in Qantas in a decade.

The board clearly knew the only way to completely change the institutionalised culture within Qantas was to appoint the chief executive of the little cousin to take over the group. Directors are also telling you via this appointment that they believe the Jetstar model (or a variant) is the way of the future for the airline. Joyce's appointment was clearly an attempt to revitalise the Qantas culture. That is a massive job, and it's a job that only a "young gun" from an aggressive and lean background can achieve.

I will be very surprised if Joyce doesn't prove to be an inspired choice. While we all know airlines are the toughest industry in the world, well-run ones can make good money. I congratulate the Qantas board for making this "ballsy" decision in somewhat uncertain times for airlines. The company needed a new broom and it has arrived.

Who is this bloke?

A similar "ballsy" yet absolutely necessary decision was taken by Michael Chaney and the board of National Australia Bank (NAB) with the appointment of Cameron Clyne as chief executive. NAB has simply bumbled from one debacle to the next and, quite frankly, it was starting to affect Chaney's unblemished reputation. The NAB share price has basically gone nowhere for a decade in absolute terms.

The "group executive committee" had at least two internal candidates that were higher on the pecking order than Cameron Clyne, 40, the managing director and chief executive of the Bank of New Zealand. Ahmed Fahour and Michael Ullmer had significantly more direct banking experience than Clyne. In fact, Clyne has only three years direct experience working for a bank, but he has significantly more experience than all other candidates in NOT working for a bank and that is exactly what NAB needs right now. If ever a company needed to experience "creative destruction" in terms of management change it is NAB.

Clyne's experience is as a financial services consultant. He was managing partner of PricewaterhouseCoopers Asia-Pacific consulting business and by all accounts was an excellent adviser to numerous financial institutions.

I realise people find it difficult to believe that a 40 year old Kiwi with only three years experience inside a bank is the right choice as chief executive of NAB, but he will be. Again, I have checked with banking industry sources who all say he is an absolutely first-class operator. I even had the chief executive of another major Australian bank tell me directly that "Cameron Clyne is an excellent choice". It’s rare that a competitor praises a new CEO, but this guy meant what he said.

From what I understand, Clyne is already causing shockwaves inside NAB by choosing to run the Melbourne-based NAB from the financial capital of Sydney. I reckon this is his first smart move as the Melbourne-based banks (ANZ, NAB) have been hit hard in the credit crisis, while the Sydney based ones (CBA, WBC, SGB) have escaped relatively unscathed. Is this a coincidence or do you limit risk by being based in the financial capital? I am certain you are a bigger chance of being "in the loop" and therefore limiting risk by being where the action is. It's pretty hard to see how being based in Melbourne helps, and I think Clyne's decision to base himself in Sydney is smart.

There's no doubt Clyne has a big job in front of him. He may well "clear the decks" in months to come and embark on a capital-raising. In fact, that would be the best thing he could do. Just take the medicine, take the punishment for the mistakes of previous management, and get on with life. However, while the first few months might well be a bumpy ride for him and the NAB share price, I believe Clyne will also prove to be an inspired choice. Again, this is a board saying "no more, it's time for the complete cultural change using a young gun". That's a ballsy yet correct call.

Who is this bloke?

I'll give you a hint. He was appointed in November 2007 as chief executive of the biggest steel producer in Australia and New Zealand. He previously spent two years as the chief financial officer of the same company. Before that he was chief executive of TXU Energy in Dallas. Yes, it's the low-profile Paul O'Malley, who delivered his maiden full year result for BlueScope Steel a few days ago. That result, despite unprecedented cost pressure headwinds, was excellent with earnings per share up 23% and both the final and full-year dividends higher.

O'Malley is 43 with only three years direct experience in the steel industry. Again, the BlueScope board made a ballsy choice in appointing him. However, as I have written in these notes before when writing about BlueScope, my direct feedback from suppliers and customers is that he is also first-class operator. I really like the combination of young-gun thinking and old-school assets. That was worked very well at BHP and it will also work at BlueScope.

The "young gun" portfolio

None of what I write above will yield instant rewards in terms of share prices. However, the trend has been set by the Kloppers appointment and it's clear that corporate Australia is starting to follow BHP's lead and appoint young, driven, cultural change agents. I think this is broadly a good development that corporate Australia is now accepting "if you're good enough, you're old enough".

I back people with assets. BHP, Qantas, NAB and BlueScope have tremendous asset bases and barriers to entry. Now, they all have the next generation of corporate leadership. Yes, they are all facing short-term headwinds of one form or another, but now they have driven cultural change agents in charge who carry no historic baggage. I'd be backing the "young gun" portfolio while their share prices are currently out of favour and see where they take us over the next three years. All four are clear and present value with strong dividend yield support.

Charlie Aitken, a director of Southern Cross Equities, may have interests in any of the stocks mentioned.