CEO Turnover on the Rise
October 16 2008 by Fayazuddin A Shirazi Research Priyanka Naidu
With rapid economic changes taking the center stage in the
The prominent change however is that, this year, more and more CEOs have been €˜asked to quit’. CE analysis clearly indicates that there is a three-fold increase in the number of CEOs who have been fired this year in comparison to the same corresponding period last year.
All in all the first quarter of 2008 has reported about 37 cases of transitions for the period Jan 1st 2008 to 30th June 2008 as against 27 in 2007. Additionally CE Online analysis shows that there is an increase of about 85 percent in CEO turnover percentage for the first quarter of 2008 with 4.4 percent of the sample CEOs departing from the company as against 2.4 percent for the same period in 2007. However, in the second quarter the turnover figures mostly remain unchanged with a slight decline of 0.2 percent in 2008.
Quarter | 2008 | 2007 |
Q1 | 4.4% | 2.4% |
Q2 | 2.8% | 3% |
2008 Snapshot of CEO Turnover
As on
Turnover percentage
Group (Fortune and S&P 500) | 2008 | 2007 |
Overall 500 | 7.2% | 5.4% |
1-100 | 11% | 6% |
101-200 | 4% | 5% |
201-300 | 6% | 3% |
301-400 | 8% | 8% |
401-500 | 8% | 5% |
Further analysis of the Fortune 500 companies shows that each group of 100 companies has reported a different turnover phenomenon. While turnover this year was relatively even across majority of the groups, the Fortune 1 to100 companies and Fortune 201 to 300 companies, reported an increase of about 100 percent at six percent in 2007 to 11 percent in 2008; and three percent in 2007 to six percent in 2008 respectively.
However, companies categorized as Fortune 301 to 400 witnessed no change in leadership at the top with the percentages remaining stable at eight percent.
Internal vs. External Placement
Overall (of 37 new CEOs) | |
Internal | 32/37 (86.5%) |
External | 5/37 (13.5%) |
The majority of the CEOs at 86.5 percent in the S&P 500 were internal placements, which is a marginal increase of 1.5 percent over last year’s figure of 85 percent for the same period. However, only 13.5 percent of the S&P 500 companies were external placements.
Reason for Leadership Change
There are three main reasons for the change in guard at the top leadership of companies with voluntary or involuntary step down taking the top place, followed by retirement.
Of the 37 transitions, the most common reason at 36 percent is either voluntary or involuntary resignation of the incumbent CEO. The second reason for change in leadership at 27 percent of the companies was the retirement, which was interestingly the number one reason last year with 52 percent of companies reported retirement of their CEOs on attaining superannuation in 2007.
About 61 percent of the former CEO’s stepped down voluntarily and the remaining 39 percent stepped down with no reasons disclosed.
Interestingly, the most noteworthy change is in the number of CEOs who have been forced out of office for various reasons. About thirteen percent were dismissed for their poor performance in the first two quarters of this year, which is a three-fold increase in comparison with 2007 figures. Some of the popular figures who were fired included CEOs such as Martin Sullivan of AIG, Ken Thompson of Wachovia, Michael Cherkasky of Marsh & McLennan, Edward J. Zander of Motorola and James L. Donald of Starbucks.
Reason | 2008 | 2007 |
| Former CEO Retired | 27% | 52% |
Planned Succession | 11% | 0 |
Former CEO stepped down | 36% | 11% |
Board forced former CEO out | 13% | 0 |
Permanent CEO replaced Interim CEO | 11% | 11% |
Former CEO Resigned | 2 % | 26% |
Former CEO in bad health or passed away | 0 | 0 |
5 Prominent Transitions for the period Q1-Q2 2007
| Company Name | Executive Out | Executive In |
| AT&T | Edward Whitacre | Randall Stephenson |
| Home Depot | Robert L.Nardelli | Francis S. Blake |
| WellPoint | Larry C. Glasscock | Angela F. Braly |
| Dell | Kevin Rollins | Michael S. Dell |
| Wells | Richard M. Kovacevich | John Stumpf |
5 Prominent Transitions for the period Q1-Q2 2008
| Company Name | Executive Out | Executive In |
| American International Group | Martin Sullivan | Robert B Willumstad |
| Tagget | Robert J. Ulrich | Gredd Steinhafel |
| Wachovia | Ken Thompson | Robert K. Steel |
| United Technologies | George David | Louis Chenevert |
| Sears Holdings | Aylwin B. Lewis | Bruce Johnson (Interim) |
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