CEO succession 2005: the crest of the wave

Global turnover of CEOs hit a new record in 2005, with more than one in seven of the world's largest companies changing leaders compared with less than 10% a decade ago.

by Strategy + Business
Last Updated: 23 Jul 2013

Four times as many CEOs were forced out last year as in 1995, while overall a half of all CEOs leave because of poor performance or following mergers (rather than through retirement or other planned departure).

Boards of directors and shareholders are increasingly taking action against underperformance, according to this annual study of CEO succession at the world's 2,500 largest public companies.

Other findings include an increase in the poaching of CEOs - which feeds into ever higher pay - and a tendency for CEOs brought in from outside to produce much better returns in their first two years than those promoted from within.

It seems they do better at initially shaking up a company, while CEOs promoted from inside companies do better over the longer term. Companies that hire outsiders should plan for their tenure to last about five years: time for transformational improvements to take hold and be recognised, but with a replacement found before performance trails off.  

Source:
CEO Succession 2005: the crest of the wave,
Chuck Lucier, Paul Kocourek and Rolf Habbel,
Strategy + Business, Issue 43, summer 2006

Review by Steve Lodge

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