Reversing a trend, CEO departures in the 500 largest revenue-producing U.S. companies fell in the first three quarters of 2006 compared with the same period in 2005, according to the latest CEO Departures study by global public relations firm Weber Shandwick. The decline is a dramatic reversal of the steady rise in CEO departures since 2000, and the firm believes it could also signal greater confidence in CEOs holding office today and less turmoil at the most senior levels of U.S. business.
In the first three quarters of 2006, 49 CEOs departed in the 500 largest revenue-producing U.S. companies, compared to 58 CEOs in the same period in 2005: a 16 percent decline.
Of the new CEOs announced in the first three quarters of 2006, 18 percent were interim CEOs (9 out of 49 new CEO announcements). By comparison, nine interim CEOs were announced in all of 2005, and only two interim CEOs were named in 2004. This growing trend of interim or acting CEOs was first identified by Weber Shandwick earlier this year.
For the first three quarters of 2005 and 2006, insider executives continued to outnumber outsider executives in being selected as new CEOs in the largest U.S. companies. However, 2006 had an even greater percentage of insider CEO successions than 2005 (69 versus 59 percent).
One-third (33 percent) of Fortune 500 CEOs made the “Five Year Club” of CEOs who led their companies from 2000 to 2005. Industries with the most CEOs in the “Five Year Club” are commercial banks, insurance-property/casualty companies and utility companies.
“The revolving door in the corner office of our largest U.S. companies appears to be slowing down. Stringent regulatory restrictions, greater board oversight and a higher caliber CEO may finally be having a dampening effect on CEO churn,” says Leslie Gaines-Ross, Weber Shandwick’s chief reputation strategist and CEO expert. “CEO stability can only be good news since CEO departures tend to increase customer concerns, employee uncertainty, investor anxiety and company paralysis.
“However, the good news about fewer CEO departures is accompanied by reminders that corporate America still faces a lack of CEO longevity. The rise in 2006 Interim CEOs underscores a significant board challenge: having groomed successors in the pipeline when current CEOs suddenly depart.”