Out without a bang: CEO turnover remains high

Corporate boards are increasingly quick to dismiss underperforming CEOs, a new study by consultancy Booz Allen Hamilton found.

by Booz Allen Hamilton
Last Updated: 23 Jul 2013

Less than half of departing CEOs left their jobs under 'normal' circumstances in 2006, and CEO turnover continues to be high amongst the world's largest public corporations.

CEO Succession 2006: the era of the inclusive leader found that the CEO environment was becoming increasingly demanding. Board members in particular were showing less tolerance of poor performance, and the study found that the roles of CEO and chair were increasingly split. Companies tended to favour external chairs who had not previously served as chief exec.

"It is clearly time to say goodbye to the age of the imperial CEO," says Steven Wheeler, senior VP at Booz Allen. "Welcome to the era of the inclusive CEO, who embraces and reflects the concerns of board members, investors and other constituencies."

The study found that annual CEO turnover and performance-related turnover had both slightly decreased since 2005 but remained significantly higher than in 1995 (+50% and +318% respectively). "Boards are flexing their muscles when dealing with chief executives who lack a path to future growth," says Wheeler. Future successful CEOs will have to give board members a voice in developing strategy if they want to retain their seats, he adds.

In contrast, departures due to M&A activity increased in 2006, accounting for 22% of ends of tenure (18% in 2005). Interestingly however, this is perhaps the best strategy for CEOs to go following a successful turnaround and taking advantage of their strong, proven restructuring skills.

CEO succession: The era of the inclusive leader
Booz Allen Hamilton (the study will also be available in the summer issue of strategy+business out on June 1)

Review by Emilie Filou

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