Companies Turn to New CEOs

In 2012, the world’s largest 2,500 public companies were very active in putting in place the leaders they need: 15.0 percent of CEOs at those companies left office last year, up from 14.2 percent in 2011. This is the second-highest rate of CEO turnovers in the 13-year history of the Booz study conducted by Ken Favaro, Per-Ola Karlson, and Gary L. Nelson. The 2012 study saw the largest share of planned CEO successions in all the years Booz examined the group. Planned successions (as opposed to CEOs who were forced out or who lost their jobs because of an acquisition) accounted for 72 percent of all turnovers in 2012, up from 46 percent in 2006. This suggests that companies are working more thoughtfully than ever to ensure they put in place new leaders who will best serve the company for years to come. Who are those leaders? For the most part, they are familiar faces: Companies promoted insiders (people already at the company) 71 percent of the time—and a quarter of all new leaders had worked at the same company for their whole career; 81 percent of new CEOs were from the same country where the company’s headquarters was located; and 95 percent were men.

The following are excerpts from the report’s main findings:

• • Companies are actively generating CEO successions and working thoughtfully to ensure they get the leaders they need, after a steep fall in turnovers during the recent recession.
    – In 2012, the 2,500 largest public companies in the world generated the second-highest turnover rate since 2000: 15.0 percent.

• • With this rate following last year’s 14.2 percent rate, CEO turnover is restabilizing around its historical level after a significant dip during the recent recession. The 2012 rate is slightly higher than the eight-year historical average of just over 14 percent.

• • The highest turnover rate in the history of the study was 15.4 percent in 2005, which followed close on the heels of low rates during the recession of the early2000s.
    – Companies are increasingly planning their successions, seeking to build on the leadership stability most have enjoyed as the economy has improved.

• • From a low of 46 percent in 2006, the share of turnovers that were planned has risen steadily, to 72 percent in 2012. This is the highest share of planned turnovers since Booz & Company began the study in 2000. The share of planned turnovers this year may be so high in part because some companies postponed a transition during the worst of the crisis and are now feeling able to manage a change.

• Turnovers related to M&A accounted for only 9 percent of all turnovers in 2012, the lowest share ever. This is simply a result of the overall low rate of major deals in 2012.