Mind your Step

The announcement of Ed Close as the incoming CEO of nib was not well received by the market initially. Ultimately, industry analysts will evaluate nib based on future risk and opportunity, and they seemed unimpressed by the announcement. Although the share price only decreased by 3.5%, the announcement caused nib's shares to trade under $7.00 for the first time in nearly 2 years. This is not a positive sign for a company that has historically managed investor sentiment well.

Edward Close - New Chief Executive Officer nib Group

In comparison Ramsay Healthcare made a safer choice by appointing Natalie Davie as a Group Executive. Despite her lack of healthcare experience, this decision reflects an understanding that perception is as important as capability in such appointments and Natalie has the track record that investors look for.

Many in the industry are questioning nib's board's decision-making process. While many analysts may have expected Mark to retire in the coming years, the market likely anticipated a broader search and likely the appointment of external talent to strengthen the company further.

All of this indicates that the next moves by Ed will require careful consideration. These decisions could significantly influence how the markets perceive him, and will be seen by investors as an early indicator of how well thought out the appointment really was by nib's board.

Ed's first significant test will be the selection of his replacement for his current role. The CEO of Australian Resident Health Insurance (ARHI) for nib is a crucial position within the executive team, second only to the group CEO and CFO roles. This position controls the majority of nib's revenue and expenses and can greatly impact the company's financial performance. For a market which views nib historically as a good dividend stock, the relative risk on a untested group CEO with a weak candidate in ARHI CEO role could be to much for the investment market to accept.

All in all, an internal promotion to this role might be tempting for Ed, as it could help establish his leadership in the short term. It could also be his first significant mistake. Following Ed's internal promotion to the Group Executive role, the market will seek comfort from the strength across nib's executive positions. The selection of this role will be viewed as pivotal to the company's performance. Ultimately it will be challenging to convince the market that internal talent is so strong that both the group CEO and the subsequent replacement for the ARHI CEO role can be sourced internally.

Will he have the courage to explore the broader market to find the best replacement possible for shareholders? Or will internal politics heavily influence his early leadership, leading to the promotion of an internal candidate to shore up his leadership?

The only certainty we have is that the markets will be watching, and the share price the true indicator of success or failure on this first decision. Ed will have to mind his step on this first big decision or risk an early stumble in his first test.