OB in Action Case Study

New Leadership at TMX Group

After monthsof speculation, a 57-year-old American executive with little name recognition in Canada, Lou Eccleston, was named the CEO of the TMX Group Limited Emmer of the Toronto Stock Exchange -TSX) on November 3, 2014, replacing Thomas A Kloet. Almost immediately after Kloet had made his announcement to leave the company in March of the same year, a search committee was created to find his successor, a responsibility that the board and HR took very seriously. The committee had one mandate: find the best leader to replace Kloet in an ever-changing, complex, and dynamic industry. As Mary Lou Hukezalie, senior vice-president and group head of human resources at TMX Group, stated, "If you think back to the beginning of the 2000s, the Toronto Stock Exchange was one product, one place, doing one thing, and that was really equity trading. Over time, we've seen the advancement of broader types of trading ... (but) we didn't drop anything." As the industry and business has changed over the last 16 years, so has the type of leadership that TMX needs changed.

THOMAS A. KLOET-FORMER CEO

When 65-year-old Thomas (Tom) Kloet stepped down as CEO in August 2014, he had served for two years as CEO with the TMX Group Ltd (Connerly Maple Group Acquisition Corporation) and then before that as CEO and President of the TMX Group Inc. (July 2008-July 2012). He was the first senior executive leader named to oversee the newly-merged organization of the TSX and Montreal Exchange. His ability to communicate and reassure stakeholders within a broad community was an asset.

Kloet earned his BA in Business Administration from the University of Iowa in 1980, and then followed up his degree with his CPA certification soon thereafter. After a few years working in the always very costly and cash-strapped health-care field and also in the not-for-profit sector, Kloet quickly began moving toward the banking industry. Just ten years after graduating from university, Kloet was senior vice-president of ABN AMRO Bank, Nevada. By 2000, Kloet had joined the Singapore Exchange Ltd. for two years, and then for the next six years he served as CEO for the Americas of Newedge Group before joining TMX Group. By the time Kloet retired from TMX Group Ltd., he was connected to 34 board members in three different organizations across 10 different industries.

LOU ECCLESTON -CURRENT CEO

When Lou Eccleston was made CEO of TMX Group Ltd, it left traders and market users casting about for information on the man who would be running the company at the heart of Canada's most important financial markets. The CEO of the TMX Group is a key figure in the financial community and a player in debates on everything from high frequency trading to Canada's economic future. But who was Lou Eccleston? Where did the selection committee find him, as he was virtually an unknown to traders and investors alike? As Doug Clark, head of research brokerage firm ITG Canada stated at the time," ... everyone is saying, "How did they pick a guy who has no experience with running a market or having any dealings with issues?" That seems to be the big concern." Clark's comments rang true with many in the industry.

According to Bloomberg Business, Eccleston's corporate background profile is not easy to pin down as no history is provided prior to 2003 other than Eccleston earning a BA in Economics from Drew University and an MA in Business Administration from La Salle University -Philadelphia. In 2003, he was named executive of the year by Inside Market Data, and by 2004 he was working for Bloomberg LP and then Thomson Financial as president of global sales. After a few years, he moved on to become CEO and chairman at tech company Pivot Inc., only to join Standard & Poor's

{S&P) by 2008 where he assumed an executive managing director position. By 2012 he was chair man and director of S&P Dow Jones Indices LLC. Before becoming CEO of TMX. Group, Eccleston was at McGraw-Hill Financlal1 overseeing a unit that provided real-time data. His background is summarized as having 30 years of extensive experience gained in senior leadership roles within the information services, financial technology, and capital market services sectors. According to the Canadian media, Eccleston has the background of a data expert-a key business for TMX.

THE SEARCH COMMITTEE CHALLENGES

Early on in the process of finding a replacement for Kloet1 the TMX. search committee had to consider that the new leader would have to constantly deal with Canadian regulators, understand the complex rivalries and alliances between the different market users, and appreciate te marketing of the company's stock markets to corporate issuers. In other words, the committee was involved in what the HR industry terms a rigorous "succession management planning process" -they were looking for an individual with "high learning agility." But what does that mean? Click here to learn about executive search committees. In this brief interview, talent management executive David Gibbons discusses what executive search committees look for when recruiting and selecting high profile executives.

When it came to leading the TMX Group, it was critical that the committee find a successor with the ability to deal with persistent ever-changing market conditions; even those that were occurring at the time of the search. "The evolution of what was required from the (new) CEO was actually happening in real time ... ," said Hukezalie. A second challenge to the search committee was satisfying the board membership. Since the board members are actually the owners-not just the shareholders said Hukezalie, their interest in who would be leading the company, and how the organization would be motivating and incentivizing that individual, was very clear. "The CEO is their proxy ... and so you're putting your faith in the individual's ability," said Hukezalie. Because of this, the search committee had the chair of the board sitting with human resource executives, among others.

The third challenge became the cost of recruiting/selecting Canadian talent over global talent. "In reality, when we came to the talent base and what we could afford, the kinds of people in the banks that we would have liked to have had access to were already above our price point," said Hukezalie. "Interestingly, the Canadian talent was almost unaffordable to us-and the global talent was, in fact, more affordable."

SUMMARY

At the time of this writing, Eccleston continues to be CEO of TMX Group Ltd Bloomberg Business reports in Eccleston's profile that he made $1.6 million (as of fiscal year 2014) and is connected to 18 board members in one organization across seven different industries. According to Canadian Business listing of Canada's Top 100 Highest-Paid CEOs, the average CEO earns $9.2 million-more than 190 times the average Canadian income of $47,358. Eccleston does not appear on this list because the lowest salary of the top 100 is over $4 million in total compensation, significantly more than what Eccleston earns.

Questions for Discussion

1. Compare and contrast the backgrom1ds of Kloet and Eccleston. Refer to Table below to identify which of the six traits applies.
2. What situation(s) changed, or were changing, during Kloet's tenure at TMX. Group that would prompt the chair of the board to sit on the search committee and be actively involved with finding his replacement?
3. Referring to table below, where would you predict a data-driven CEO to be on the employee-centered participation continuum? Explain what motivation would be behind the selection committee.
4. Was the search committee looking for a leader whose behaviors were more focused on consideration (people-centered) or initiating structure (task-oriented)? Explain your thinking.

. Locus of control Task ability Leader behaviours Need for achievement Leadership Experience I . Path goal clarifying effectiveness Need for clarity 2. Achievement- Employee oriented motivation 3. Work facilitation Employee 4. Supportive satisfaction 5. Interaction Employee facilitation performance 6. Group-oriented Leader decision making acceptance 7. Representation Environmental factors Work-unit and networking Task structure performance 8. Value-based Work group dynamics