Companies Turn to New CEOs

In an exhaustive 2012 study of Chief Executives, “Time for New CEOs,” Booz & Co. management consultants, reports the highest number of planned CEO successions at the world’s largest 2,500 public companies in the history of the study and finds that companies often seek familiarity in new CEOs. It also asserts that the “global CEO” is more myth than reality.

May 22 2013 by

  • Forced turnovers, at 19 percent of all turnovers in 2012, are their second-lowest share ever, and the fourth-lowest rate ever. This is another sign that companies are now able to take a thoughtful approach to transitions: They are stable enough to force someone out if they need to, but in general they have the leaders they want or the time to allow a CEO to improve performance
  • The report examined the professional backgrounds of the incoming class of CEOs. The data suggests that the “global CEO” is more mythical than real—indeed, companies often seek familiarity in a new CEO.
    – With 300 incoming CEOs, this is the largest class since we started our study in 2000.
    – Most companies are actively focusing on developing the leaders they need: 71 percent of new CEOs in 2012 are insiders—people who were promoted from within.
    – Though the companies we studied are large ones, most of which operate on a global scale, they tend to stick close to home when picking a CEO. In 2012, 81 percent of companies that hired a CEO chose one from the same country where company head-quarters is located, and an additional 9 percent hired a CEO from a different country but the same region as headquarters.
    – 55 percent of this year’s new CEOs joined their current company from one in the same industry, whether they did so as CEO or in another position.
  • Another way in which the new class of CEOs is familiar is gender: Only 5 percent of the incoming CEOs in 2012 are women—a notable rise from the 3 percent average over the prior three years, but still a tiny share.
  • In terms of educational background, 29 percent of new CEOs in 2012 have an MBA. The median age of those with an MBA was 52, two years lower than for those without, suggesting that taking time out to earn an MBA may speed up a career in the long run.
  • In 2012, the hiring done by the 250 largest companies was a little different from that of smaller ones (the bottom 2,250): The larger companies’ incoming CEOs were more often insiders (83 percent vs. 69 percent), more often had experience in different regions than company headquarters (52 percent vs. 44 percent), and more often had MBAs (41 percent vs. 28 percent).