In 2014, the percentage of S&P 500 companies that fired their CEO was the lowest since 2010, according to the 2014 edition of CEO Succession Practices, a report released today by
"Our research shows that, following years of exceptional scrutiny of CEO performance, the witch hunt is over and senior management is finally getting a break. It is happening because the stock market has been faring so well, shareholders are happy and directors feel less pressure to bring change quickly and at all costs," says
CEO Succession Practices, which
"The report also highlights how CEO succession events often cause sweeping change within the senior management team," adds Professor Schloetzer. "Nearly one-quarter of succession events involve a change at the director or senior executive level, suggesting that boards would be wise to view succession planning as an initiative that reaches beyond the CEO."
Following are some of the key findings described in the 2014 edition of the report. To access the report, visit www.conference-board.org/CEOSuccession2014.
* The number of companies in the S&P 500 that also elected their new CEO as chairman of the board of directors was down significantly in 2014. Only 9.5 percent of the CEO successions at S&P 500 companies in 2014 involved the immediate joint appointment of the CEO as board chairman, down from 18.8 percent in 2012, and 19.2 percent in 2011. This trend is likely a result of the move in recent years by many large companies to separate their chairman and CEO roles. However, it is unclear whether the split roles persist, since many chairmen are the departing CEOs who typically exit the firm within one fiscal year.
* Most departing CEOs remained as board chairman for at least a brief transition period. Based on a review of 2014 succession announcements, 52.4 percent of departing CEOs remained as board chairman for at least a brief transition period, typically until the next shareholder meeting. This rate is higher than the approximately 33 percent rate reported in 2012.
* While employee tenure across the labor market has stayed relatively stable, the average tenure of a departing CEO has declined. The average tenure of a departing S&P 500 company CEO has decreased in recent years, from approximately 10 years in 2000 to 8.1 years in 2012. In contrast, employee tenure across the broader labor market has remained relatively stable during the past 25 years, averaging 5.1 years in 2008, compared with 5.0 years in 1983. The year 2014 was an outlier, with an average departing CEO tenure of 9.7 years--the longest since 2002, presumably due to CEO retirements that were delayed for economic considerations during recent global economic turmoil. The general decline in average departing CEO tenure recorded until 2014 could be due to several factors. The pressure of serving as the CEO of a large company in an increasingly competitive global marketplace could contribute to voluntarily shorter tenures; the increasing presence of private-equity firms has created new employment opportunities for CEO-level talent; and increased director independence and increased shareholder scrutiny might make boards more inclined to dismiss CEOs who perform below expectations.
* The overall upward trend of outsider promotions continued through 2012, although the rate of outside appointments has stabilized in recent years.The upward trend recorded since the 1970s in the appointment of "outsiders" (those who had served less than one year with the company) to the CEO role continues, but the momentum has slowed. In 2014, 23.8 percent of incoming CEOs were brought in from outside the company, a modest decrease from the 27.1 percent rate in 2012. The remaining 76.2 percent of incoming CEOs in 2014 were "insiders," or senior executives promoted to the CEO position after serving at least one year with the company.
The report features case studies from notable 2014 CEO turnover events, including
The publication of the report was possible thanks to the generous support of
Source: CEO Succession Practices: 2014 Edition, Report # R-1544-14-RR,
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