Record CEO casualty rate in 2005
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Manufacturing News, Source : The Manufacturer US
Published : 18 May 2006 16:31
The turnover rate of chief executives in the world’s largest companies hit a peak last year as impatient investors booted out underachieving bosses in record numbers.
A global study of the 2,500 largest publicly traded corporations, published today by consulting firm Booz Allen Hamilton, shows that 15.3 percent of chief executives left office in 2005, an increase of 4.1 percent over 2004. One-third of these were performance-related, i.e., where the CEO was forced to resign because of poor performance or disagreements with the board, representing a four-fold increase over the last 10 years. Globally, only 51 percent of outgoing CEOs left office voluntarily, with successions resulting from mergers making up the difference.
In the US, a record 35 percent of CEO departures were performance-related. In Europe the figure was 42 percent, not a record, but close. Merger-driven successions were also at their highest global level since 2000.
The results are seen as the product of new corporate governance measures. “We believe the current annual rate of CEO turnover is the ‘new normal’,” said Alan Gemes, a vice-president at Booz Allen Hamilton. “Today’s typical CEO knows that he will remain in office only as long as performance for investors is acceptable.” Booz Allen’s study, CEO Succession 2005: The Crest of the Turnover Wave, is being published in the Summer 2006 issue of strategy+business, its quarterly thought leadership magazine, which goes on sale on newsstands in June.
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