The A2 Milk Company Ltd (ASX: A2M) share price has been a top ASX share for a long time. In fact, the Kiwi dairy share is up 34.5% in 2020 and 2,556.3% in the last 5 years.
However, I think the unveiling of a new CEO could be a good sign for further growth.
Who is the new A2 Milk CEO?
A2 Milk on Tuesday announced its new leader with Geoffrey Babidge having been serving in an interim capacity since December 2019.
The new man for the job is Hanesbrands’ president of innerwear, David Bortolussi.
Mr Bortolussi will join the Kiwi dairy company in early 2021 with a base salary of $1.75 million.
The A2 Milk share price edged 1.20% lower on Tuesday following the news but I believe it could climb higher in the medium-term.
Why is that good for the A2 Milk share price?
I think this represents a step in the right direction for A2 Milk and its corporate governance controls.
CEO announcements are a hot topic for A2 Milk after former CEO Jayne Hrdlicka lasted just 18 months in the top job.
Ms Hrdlicka was gifted rights to 600,000 A2 Milk shares upon signing in July 2018.
Those rights were sold almost as quickly as they were granted to net the former CEO a tidy profit without much risk in the company’s performance.
That’s why I think the latest appointment could be good news for the A2 Milk share price.
That seems to be the sentiment shared by prominent investors interviewed for an article in the Australian Financial Review (AFR).
Importantly, Mr Bortolussi will not be able to sell any shares until he owns the equivalent of one year’s salary.
That to me says that the A2 Milk board has learned its lesson. I like that the board is looking to re-align executive remuneration with shareholder interests.
Stronger corporate governance and a CEO with “skin in the game” can only be a good thing for the A2 Milk share price.
There are some challenges ahead, particularly with frosty Australia-China relations, but I’m quietly confident for 2021.
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More reading
- 5 quality ASX shares to buy in August
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- A2 Milk Company share price on watch after naming its new CEO
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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