CEO Turnover Declined Slightly in 2006
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CEO

CEO Turnover Declined Slightly in 2006

Around the world, 15 percent of the largest companies experienced a chief executive change in 2006 (10 percent in North America, 18 percent in Europe and 16 percent in Asia Pacific). But the overall departure rate of global CEOs declined from 17 percent in 2005 to 15 percent in 2006.

Paul Holmes

Around the world, 15 percent of the largest companies experienced a chief executive change in 2006 (10 percent in North America, 18 percent in Europe and 16 percent in Asia Pacific). But the overall departure rate of global CEOs declined from 17 percent in 2005 to 15 percent in 2006, and the largest companies headquartered in North America experienced the most marked decline, from 18 percent in 2005 down to 10 percent in 2006. In contrast, the largest company CEOs in Europe saw a modest rise (from 15 percent in 2005 to 18 percent in 2006) while Asia Pacific witnessed no change.

The findings are based on CEO departures at the world’s 500 largest revenue-producing companies, analyzed by Weber Shandwick worldwide, and show that disruption in the chief executive suite is clearly a worldwide phenomenon.

According to Weber Shandwick President Andy Polansky, “Considering that the world’s leading 500 companies are responsible for generating approximately $19 trillion in revenue, quality CEO succession planning, leadership training and board accountability have far-reaching consequences, not only for individual companies but also for members of the worldwide business community. Weber Shandwick has a great deal of experience helping companies navigate communications challenges in an environment that rewards transparency and outreach to key constituencies. These components are integral to good corporate governance and management practices.”

The analysis revealed other significant shifts in the chief executive suite of the world’s 500 largest companies. For example, the five countries worldwide experiencing the greatest CEO turnover in 2006 were the United States, Japan, Britain, Germany and France.  In 2005, the greatest CEO churn worldwide occurred in the United States, Japan, France, Britain and the Netherlands.

In 2006, over one-half (57 percent) of global 500 CEOs retired or left office for reasons such as planned succession, promotion to chairman, political appointment or a new position at another company.  Nearly one-third (31 percent) left against their will and the remainder (12 percent) exited due to mergers, illness, interim positions and corporate governance changes.

In both 2006 and 2005, insider executives continued to outnumber outsider executives among new CEOs at the world’s largest companies. In 2006, 65 percent of global CEOs were chosen from inside the company versus 35 percent chosen from outside. The proportion of insider to outsider executives remained stable year over year (67 percent and 33 percent in 2005).

“Despite the good news that overall CEO churn among the world’s largest 500 companies appears to be slowing down, uncertainty from CEO change is felt from the boardroom to the mailroom,” says Leslie Gaines-Ross, Weber Shandwick’s chief reputation strategist. “Whether CEO departures are due to standard succession planning, mergers, poor financial performance or wrongdoing, boards everywhere must fill the leadership pipeline with the best and the brightest for the challenging times ahead.”

 

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