Bringing an insider or an outsider as the CEO along with CEO tenure has relevance for a firm’s performance and growth. This relationship has been explored by many authors across various economies. Preference for insider over an outsider in CEO succession is appreciated in majority of the cases. Regarding tenure, the average tenure of CEOs in big companies used to be nine years in 1980 which declined to about just over seven in 2001 (The Economist dated October 23, 2003).
Both these aspects get attention whenever there is an exit of a CEO in a prominent company. In August 2024, Mark Schneider (58 at that time) stepped down as the CEO of Nestle SA after serving for almost eight years. He joined Nestle SA in 2017. The company was struggling to grow sales, attract customers to the company’s branded products amid high rate of inflation. Replacement came in the form of Laurent Freixe (62 at the time of appointment), the company’s Executive Vice President and CEO for the Latin American region. It was badly needed as Nestle’s share had fallen 8.0 per cent in 2024 in contrast to Unilever that had gained 29 per cent during the same period. Exit had a healthcare connection too as Mark Schneider had served a prominent healthcare company – Fresenius prior to joining Nestle. Further, he was the first external hire in the company for the job of the CEO in a century. In contrast to that, Laurent Freixe came as an internal hire as he was working with company for almost four decades. Freixe had joined the company in 1986 and had served for almost 16 years on the Executive Board.
Most recently, the exit of existing CEO and experience of newly designated CEO in the same company attracted eyeballs in February 2025 when Unilever replaced CEO Hein Schumacher by appointing CFO Fernando Fernandez as the CEO. Schumacher was on the job for about 18 months as he joined Unilever in July 2023. He was an external candidate who was taken as the CEO. Fernandez is an insider as he is with the company for more than three decades as he joined Unilever in 1988. The new CEO is expected to deal with challenges such as supply chain resilience, inflationary trends, energy crisis, declining profit margins, consumer shift towards cheaper options, among others.
Tenure of a CEO is important to ensure the continuity in any business. At the same time when strategic shakeup is desired then an outsider is preferred. In pharmaceutical sector, this aspect is crucial as certain functions such as R&D do not produce result in a short span of time. In that background, tenure of a CEO must not be too short as the change of a CEO may disturb the continuity of the R&D plan. At the same time, when results are not evident for long period then the need arises for inducting an outsider.
In India, pharmaceutical sector is dominated by family-owned businesses. As a result, the role of a CEO is assumed by a family member belonging to the promoter family. That ensures that an insider is joining as the CEO and a longer tenure is granted to a CEO. In those pharmaceutical companies in which a professional CEO is hired even then a longer tenure is guaranteed as the family remains among dominant promoters.
In Divi’s Laboratories which is second largest company in terms of market capitalization in pharmaceutical sector, Dr. Kiran Divi is on Board and is the CEO of the company. He is with the company since August 2001. It was in January 2020 when he took over as the CEO of the company. In Cipla that is 3rd largest company in terms of market capitalization among listed pharmaceutical companies, Umang Vohra is Managing Director and Global CEO of Cipla since September 2016. He is an insider for Cipla as he joined the company in October 2015 as its Global Chief Financial Officer. After that, he served as Cipla’s Global Chief Operating Officer from January 2016 to August 2016. In his earlier role, he had served Dr. Reddy’s Laboratories as Head of the North America business. Both companies are leading pharma companies.
Erez Israeli is the CEO of Dr. Reddy’s Laboratories (DRL) and assumed the role of the CEO in July 2019. He is in his sixth year as the CEO of DRL. In April 2018, he joined as Chief Operating Officer. Erez Israeli had extensive experience in pharmaceutical sector. He had worked with Teva Pharmaceuticals for 23 years. In that background, he could bring a different perspective with no past baggage.
Vinita Gupta is the CEO of Lupin Limited. She is the eldest daughter of Dr. Desh Bandhu Gupta, the founder of Lupin Limited. She joined Lupin way back in 1992. She was appointed as the CEO of the company, effective September 1, 2013. Hence, she is serving the organization from more than 23 years which is a long tenure as she has been a Director on the Board of the company since June 27, 2001. From May 28, 2020, she has been re-appointed as the CEO for a period of five years until May 27, 2025. In that way, there was smooth transition, no cultural shock, or quick acceptance of leadership.
In Alkem Labs, Dr. Vikas Gupta is the CEO. Prior to this role, he had worked with prominent pharmaceutical companies such as Cipla, Glenmark Pharmaceuticals, and erstwhile Ranbaxy Laboratories Limited in leadership roles. He is holding an M.B.B.S. degree. Dr. Gupta was appointed as the CEO of the company with effect from September 22, 2023. However, he has assumed the role of the CEO just about 18 months ago but has been backed by promoters.
Pranay Godha is the Managing Director & CEO of Ipca Labs. Initially, he joined as the Business Development Manager of the company on August 16, 2003. Subsequently, he was promoted as Vice President – Generics Business of the company with effect from November 1, 2004. He became the President – Generics Business of the Company in May 2006. He was appointed as the Executive Director of the Company on November 11, 2008. From April 1, 2023, he was designated as Managing Director for a period of five (05) years till November 10, 2028. His tenure with the company in the capacity of the CEO is almost two years but his total experience is more than 20 years and belongs to the founder’s family. His diverse experience, and family background positions him as an ideal candidate.
Satyanarayana Chava is the founder and CEO of Laurus Labs. He started this company in 2005. Long stay of the Founder as the CEO of a company formed by him also poses dilemma for the founder on involving outsider as the CEO or on retaining the role for himself/herself. This was shared by Bill Gates in March 2025 itself when he told in a conversation with Microsoft’s Vice Chair and President, Brad Smith about the ‘emotional weight’ of handing over the reins after stepping down as the CEO in 2000. On stepping down by Bill Gates, Steve Ballmer succeeded him. Steve Ballmer announced his retirement in the year 2013 then the search for the next CEO had sparked intense speculation. So, for pharmaceutical companies in India, the handing over the reins of the company to an outsider is likely to carry intense emotional weight as almost all pharmaceutical companies are majorly family-owned.
Longer tenure of CEOs has its own pros and cons. Member of a family-owned company who has long innings in that company, is in a better position to build relational assets. But in a dynamic environment, if that member is not able to reinvent, or lacks capability to adjust during disruptions then it can sow the seeds of failure. Talented personnel in family-owned pharmaceutical companies get to know that there is limit for them in organizational ladder. Hence, it literally freezes their career path. Therefore, companies attempt to strike the balance between benefits and costs attached to the tenure of a CEO. In this regard, the most relevant example is of Dilip Shanghvi who brought Israel Makov (73 at the time of appointment) as Executive Chairman of the Board for a three-year term in May 2012. Shanghvi re-designated himself as Managing Director. Israel Makov had extensive experience as he was the former President and CEO of Teva Pharmaceutical Industries, a prominent Israeli pharma company. It was a surprise move at that time as majority stake of the company was owned by Dilip Shangvi and his family. Even then he brought an outsider on such an important position. Over and above this, the person was a foreigner. Dilip Shanghvi had earlier inducted Kal Sundaram, former MD of GlaxoSmithKline Pharma in the board as he foresaw the need to hire professional managers at the senior level in Sun Pharma. This example offers lessons for promoter-led and family-owned pharmaceutical companies in India.
Dr. Anil Kumar Angrish-Associate Professor (Finance and Accounting), Department of Pharmaceutical Management, NIPER S.A.S. Nagar (Mohali), Punjab
Disclaimer: Views are personal and do not represent the views of the Institute.
