Respect for Elder CEOs is Increasing as Economy Mends

The financial services sector most prominently experienced a high level of CEO turnover when the crisis started to bite in 2007 and 2008. High-profile casualties at the time included Citigroup CEO Chuck Prince and Merrill Lynch CEO Stanley O’Neal, who were made accountable for massive losses associated with toxic sub-prime mortgage debt products.

More indirectly, the crisis had a dramatic impact on company strategies across all industries. Suddenly, boards wanted leaders with skills tailored to running revenue-starved operations more efficiently, rather than boom-time CEOs accustomed to managing rapid growth.

The study by nonprofit peer group The Conference Board found that CEOs in the S&P 500 aged 64 and above had an average turnover rate between 2009 and 2014 of 25.5%, while just 8% of younger CEOs departed each year.

By 2015, however, the older CEOs’ departure rate had shrunk to 15.1%, which is more aligned with the average percentage for the period between 2001 and 2008.

“There are multiple possible explanations for this finding, including, of course, an improvement in firm performance and the overall economy,” report co-author Matteo Tonello said. “But when you see older CEOs departing at a rate of 25% or higher for a number of years in a row, a slowdown becomes natural and signals the completion of a generational change process.”

The study also found that leaders are notching up lengthier tenures, with outgoing CEOs of S&P500 companies in 2015 having served for an average of 10.8 years, compared with 7.2 years in 2009.

Not surprisingly, performance was a key trigger for departures last year, with CEOs overseeing companies with poor shareholder returns having a succession rate of 12.2% in 2015, while better-performing companies had a 9.2% turnover rate.

One-in-10 CEO transitions last year involved an interim appointment, the research found.