Are our chief executives too old to cope with modern business? Are too many just producing income for shareholders and losing the excitement and growth that once characterised much of corporate life?
Here’s the story of what happened when a US company embraced that view and just over a year ago appointed a 33-year-old as chief executive officer.
In short, the stock has risen 60 per cent in that year and shareholders are less worried about income than growth. It’s like the old days.
The declining Burger King company took a big punt when, in 2013, it appointed Daniel Schwartz as chief executive. It also appointed a 28-year-old as its chief financial officer.
In Australia, Burger King operates via Hungry Jack’s, but more on that later.
Burger King’s stock rose sharply this week after Schwartz announced that it would acquire Tim Hortons, the dominant fast-food chain in Canada, for $US11 billion.
To save tax and to overcome Canadian nationalism, (Canada sees Tim Hortons as a national icon), Burger King is moving its world headquarters to Canada. Young CEOs are not bound by geography: Schwartz came into prominence working for a private equity consortium in Brazil, which purchased Burger King in 2010.
Let’s look at what else a young CEO might do to transform a tired burger chain.
Before getting the top job, Schwartz, as a rising Burger King executive, spent time working in the Burger King outlets and saw what was wrong with the company at a grass roots level. That’s essential for any modern CEO.
So Schwartz discovered from employees how to cut costs and simplify the menu.
He went for growth by attacking the big one, McDonald’s, by focusing on its weakness: too much fat in their food.
Under Schwartz, Burger King fries have much lower fat and they taste the same. Winning McDonald’s products are also copied, including the Big Mac. Now Burger King is off to France, which is a big revenue earner for McDonald’s.
Tim Hortons is a different style of fast-food restaurant to Burger King (I will never forget having a welcome turkey sandwich in Tim Hortons at Toronto airport at 4.30 a.m. after being diverted to Toronto after the long flight from Australia because of bad weather further north. It was the only place open in the terminal ) .
Schwartz will expand Tim Hortons to other countries. In Australia, Jack Cowin is the exclusive franchisee for Burger King. The two groups have had a stormy relationship over the years, including some court fights. If Cowin ever wants to sell out, then you can be sure Schwartz would be a buyer.
What does every young CEO need? In the US, there is one elder statesman that everyone tries to go to: Warren Buffett. Buffett will fund most of the Tim Hortons acquisition.