Top tier North American CEOs had longer tenures in 2006 than their European and Asia Pacific counterparts, according to Weber Shandwick’s Global 500 CEO Departures study, which found that the average tenure of departing North American CEOs was eight years and six months, compared to less than seven years for European CEOs and only about four years for Asia Pacific CEOs.
The tenure of North American CEOs increased by 20 months from 2005, according to the study, which focuses on CEO departures from the world’s 500 largest companies.
“The length of CEOs’ terms often correlates with their level of success,” says Weber Shandwick chief reputation strategist and CEO expert Dr. Leslie Gaines-Ross. “The lengthening of North American CEO tenure bodes well for corporate America and possibly reflects better board selection and succession planning. For the largest companies in the world, an average tenure of nearly 6.5 years is a welcome sign of stability and strength.”
Longer North American tenures may also be attributed to a greater proportion of CEOs leaving in 2006 for normal reasons such as retirement, planned succession, promotion, political appointment or change in employer. Fewer North American CEOs left against their will in 2006 than in the previous year.
In both 2005 and 2006, insider CEOs had longer tenures than outsider CEOs. The average 2006 tenures of insider and outsider global 500 chief executives were six years 10 months and five years, five months, respectively. This represents a significant gap of 17 months between the average tenures of insider and outsider CEOs.
“Research by Booz Allen Hamilton has shown that insider CEOs regularly outperform outsider CEOs,” says Gaines-Ross. “Insider CEOs often stay in office longer because they engender greater loyalty and support because of their familiarity with the company. Insiders also have the additional benefit of having spent time communicating with and building relationships with internal audiences than newly arriving outsider CEOs.”
Adds Weber Shandwick president Andy Polansky, “CEO departures affect stakeholders in all corners of the world. Our ongoing research into executive reputation continues to surface global trends impacting business and helps inform our thinking on related communications strategies.”