CEO Departures

October 13, 2006

CEO Departures

Believe me, I was surprised. We analyzed the turnover rate of Fortune 500 CEOs and found that the departure rate declined 16 percent since 2005. Check out the press release on on Big change from the soaring CEO churn we are all used over the past several years. We also found:

CEO Turnover – In the first three quarters of 2006, 49 CEOs departed in the 500 largest revenue-producing U.S. companies, compared to 58 CEOs in the same period in 2005 – a 16 percent decline.

Interim CEOs – Of the new CEOs announced in the first three quarters of 2006, 18 percent were Interim CEOs (9 out of 49 new CEO announcements). By comparison, nine interim CEOs were announced in all of 2005, and only two Interim CEOs were named in 2004. This growing trend of Interim or Acting CEOs was first identified by Weber Shandwick earlier this year.

Insider vs. Outsider Executives – For the first three quarters of 2005 and 2006, insider executives continued to outnumber outsider executives in being selected as new CEOs in the largest U.S. companies. However, 2006 had an even greater percentage of insider CEO successions than 2005 (69 vs. 59 percent, respectively).

CEO Five Year Club – One-third (33 percent) of Fortune 500 CEOs made the “Five Year Club,” namely CEOs who held the title from 2000 to 2005. Industries with the most CEOs in the “Five Year Club” are commercial banks, insurance-property/casualty companies and utility companies.

Here are my comments which are in the press release: “The revolving door in the corner office of our largest U.S. companies appears to be slowing down. Stringent regulatory restrictions, greater board oversight and a higher caliber CEO may finally be having a dampening effect on CEO churn. CEO stability can only be good news since CEO departures tend to increase customer concerns, employee uncertainty, investor anxiety and company paralysis.”

Lets hope that the revolving door in the corner office begins to truly slow. However, when I picked up the paper today in Detroit, I heard that there was a mass exodus of top level execs at McAfee and CNet due to backdated options. Perhaps the numbers are back on their way up already.

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Leslie Gaines-Ross
Leslie Gaines-Ross

As Weber Shandwick’s Chief Reputation Strategist, I focus on the ever changing world of reputation. For the past 25 years, I have relentlessly observed, researched and commented on the rise and fall of reputations.

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