CEO turnover rises notably in every region in 2018 except China, and included a large increase in Western Europe
CEO turnover hit a record high of 17 percent during a turbulent 2018 but there is a group of executives holding steady, according to new research.
The 2018 CEO Success study released by Strategy&, part of the PwC network, which analyzed CEO successions at the world’s largest 2,500 public companies, showed that while the median tenure of a CEO has been five years, 19 percent of all CEOs remain in position for 10 or more years.
By region, North American CEOs hold a significant margin in the probability of becoming a long term CEO at 30 percent, followed by Western Europe at 19 percent, Japan and the BRI countries (Brazil, Russia and India) at nine percent and China at seven percent.
Turnover among CEOs last year rose 3 percent higher than the 14.5 percent rate in 2017 and above what has been the norm for the last decade.
CEO turnover rose notably in every region in 2018 except China, and included a large increase in Western Europe.
Among industries, turnover was highest in communication services companies (24.5 percent), followed by materials (22.3 percent) and energy (19.7 percent). Healthcare saw the lowest rate of CEO turnover in 2018, at 11.6 percent
2018 also showed a rise in the share of CEOs who were forced out of their positions for ethical lapses. In fact, more CEOs (39 percent) were forced out for ethical lapses rather than financial performance or board struggles, a first in the study’s history. This number rose 50 percent compared to 26 percent in 2017.
Successors to long serving CEOs are not faring as well as they are likely to have shorter tenures, worse performance and more often forced out of office than the CEOs they replaced, the report also showed.
Nearly half of successor CEOs moved down a performance quartile or more compared to their predecessors. 69 percent of successors who replaced a long serving CEO in the top performance quartile ended up in the bottom two performance quartiles.
“Succeeding long-serving CEOs is clearly very challenging,” said Per-Ola Karlsson, partner and leader of the firm’s people and organization practice in the Middle East.
“Their successors typically both deliver lower returns to shareholders and are noticeably more likely to be dismissed than the legend they succeeded as well as their peers.”
The report showed that the share of incoming women CEOs was 4.9 percent down slightly from the record high of 6 percent in 2017.