CEO Turnover Rate Has Hit a Record High

According to a new study by Strategy&, the consulting arm of PwC, CEO turnovers reached 17.5 percent last year, the highest since the inception of the survey in 2000. The study, which analyzed CEO successions at the world’s 2,500 largest companies reports that while the median tenure of a CEO has now plunged to only five years, 19 percent of all CEOs remain in position for 10 or more years, consistently, over the time period analyzed.

The overall rate of forced CEO turnovers was in line with recent trends at 20 percent. Although the reasons for departures in 2018 were different. For the first time in the study’s history, more CEO departures were due to misconduct and ethical lapses than for financial performance or board struggles.

Thirty-nine percent of the 89 forced CEO dismissals were for “ethical lapses,” with offenses ranging from “fraud, bribery, insider trading, environmental disasters, inflated resumes, and sexual indiscretions.”

#MeToo Exposes Lack of Succession Planning

#MeToo movement, the campaign against sexual harassment that became a worldwide phenomenon in the autumn of 2017, fueled the ousting of corporate chieftains engaged in serious sexual misconduct at some of the largest companies.

“The rise in these kinds of dismissals reflects several societal and governance trends, including more aggressive intervention by regulatory and law enforcement authorities, new pressures for accountability about sexual harassment and sexual assault brought about by the rise of the ‘Me Too’ movement, and the increasing propensity of boards of directors to adopt a zero-tolerance stance toward executive misconduct,” PwC’s survey said.

The year was wrought with powerful executives in America stepping down amid investigations into their amoral behavior. In July, for instance, the chief executive of Barnes & Noble was ousted. Two months later, Les Moonves, chairman and CEO of CBS Corporation, left his post following several allegations of sexual misconduct that spanned much of his career.

The first wave of the #MeToo also took down some of the most high-profile executives from Papa John’s, Wynn Resorts, Intel, Walt Disney, Xerox Corp., and Athena Health, to name a few – often amid allegations of ethical lapses that ranged from sexual harassment to consensual relationships with employees.

Clearly, it is time for boards to play a more active role in maintaining a healthy workplace culture and developing formal succession planning practices. It’s also understandable why so many companies don’t have emergency succession plans – it’s not an easy feat. Many fear of offending the CEO, while some mistakenly think if they broach the subject, the chief executive will consider leaving.

CEO Turnover across Industries & Geographies

Strategy& also found that CEO turnover in general – planned successions and handoffs due to mergers & acquisitions – hit a record high in 2018, as 17.5 percent of 2,500 largest public companies had a change at the top.

CEO turnover soared in every region in 2018 except China and included a prominent increase in Europe. Turnover was highest in other mature economies such as Australia, Chile, and Poland, at 21.9 percent, and nearly as high in Russia, Brazil, and India (21.6 percent). The next-highest turnover numbers were in Western Europe at 19.8 percent, and the lowest was in North America at 14.7 percent.

Among industries, CEO turnover was highest in communication services at 24.5 percent, followed by materials (22.3 percent) and energy (19.7 percent). Healthcare industry saw the lowest rate of CEO turnover in 2018, at 11.6 percent.

Women CEO Turnover Rate Declines

The rate of incoming women CEOs was 4.9 percent down slightly from the record high of 6.0 percent in 2017. The trend has been upward since the low point of 1.0 percent in 2008. The largest percentages of women CEO turnovers originated in Brazil, India, Russia, and China and other emerging countries. The Utilities industry witnessed the largest share of women CEOs at 9.5 percent followed by Communication Services and Financial Services at 7.5 and 7.4 percent, respectively.

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Priyansha Mistry
Currently editor at The HR Digest Magazine. She helps HR professionals identify issues with their talent management and employment law. | Priyansha tweets at @PriyanshaMistry

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