What a share price jump or slump tells you about a CEO hire

The announcement of a new chief executive can have a pronounced impact on a company’s share price, good or bad. Guinness owner Diageo hiring former Tesco head Dave Lewis as its chief executive drove its share price up 5.2% on the day of the announcement.

That might not sound out of the ordinary until you realise the change in the company’s market valuation effectively said Lewis is worth £2 billion.

AJ Bell analysed price movements on every FTSE 100 CEO appointment this year and found that stocks fell by an average 0.8% on the day. While that sounds unimpressive, the range of movements tells a different story. Diageo was the bigger mover at the top end, while housebuilder Berkeley was the biggest at the bottom, falling by 8.9% on the day Richard Stearn was appointed the new boss.

FTSE 100 CEO appointments so far in 2025

Source: AJ Bell, ShareScope. *Data to 11 Nov 2025

It’s very much a case of looking at each situation on a stock-by-stock basis to understand why the shares moved in a particular way. That involves considering the company’s situation prior to the appointment, who the outgoing person is, the calibre of the new appointee, and whether the corporate strategy will change.

From the FTSE 100 appointments so far in 2025, the biggest share price gains on the day have come from individuals joining to fix a company that lost its way or to bring fresh ideas after the incumbent had been in situ for a long time. The share price jump is effectively investors expressing optimism at the new hire bringing fresh ideas.

Why did the market applaud Diageo’s CEO hire?

Dave Lewis is ‘Mr Fixit’ as far as the market is concerned, having joined Tesco with no retail experience and putting it back on track after a difficult period. Lewis has only held chair and advisory positions since leaving Tesco in 2020, so there must have been something special about Diageo for him to put on his CEO boots again.

Diageo is juggling two key problems, one internal and one external. Issues in Latin America pointed towards poor management insight, as Diageo took its eye off the ball and did not know how what stock was in the supply chain. That suggests poor oversight of essential information.

Shifting consumer habits also caught the company off guard, with weaker demand for premium spirits and the rise of younger people less interested in alcohol.

Former CEO Debra Crew struggled to steady the ship, and a prolonged period of share price weakness meant she had to go. Diageo abandoned longer-term sales targets, and it downgraded shorter-term ones.

Lewis needs to put Diageo back on track quickly. His style is to listen closely to customers and suppliers and work out what has gone wrong. The focus will be on repair work, not long-term growth, at least in the interim period.

While investors gave him a hero’s welcome, Lewis knows the market will judge him on results, not hope.

All change for GSK

GSK’s CEO change got a positive market response as investors welcomed the prospect of new leadership. Emma Walmsley had been in the top job for eight years and the pharma industry has become incredibly competitive, meaning GSK needed fresh ideas.

Walmsley didn’t necessarily do a bad job, it’s more that rivals like AstraZeneca and Eli Lilly had delivered stronger returns for shareholders in recent years, and some GSK investors might be feeling hard-done-by.

She is going out on a high note, having beaten profit estimates at her last set of quarterly results, published in October. Walmsley may still be frustrated by GSK’s share price performance during her tenure, given the changes she has made to the company’s structure and strategy, but she will probably argue that the product range and development pipeline are strong enough to carry the FTSE 100 member to her target of £40 billion in sales by 2031, compared to the £31.3 billion generated in 2024.

GSK under the guidance of Luke Miels will need to keep on gaining regulatory drug approvals and continue to bolster its drug development pipeline, ideally by organic means and research and development, or via acquisitions if necessary.

WPP’s long road to recovery

Despite a positive market reaction to WPP hiring Cindy Rose in July, the media group has since lost nearly one third of its market value. That is down to negative news flow, with WPP once again downgrading profit expectations on 30 October.

The board selected Rose to fix the business, and she will have known the scale of the recovery job before accepting the role. It is quite common for a new boss to lower expectations when they walk into a mess, giving them an easier bar to clear in the future.

Diageo investors might want to think about this situation closely. Just because a new CEO has joined to steady the ship does not mean they will produce positive results quickly. Sometimes they must make tough decisions now and wait a while for the benefits to feed through.