Study: CEOs Must Deliver Or Depart

Jan. 13, 2005
By John S. McClenahen Factory workers aren't the only people being shown the door. Increasingly, CEOs who don't deliver the goods are leaving their companies, voluntarily or involuntarily. So-called involuntary successions in 2002 increased by more ...
ByJohn S. McClenahen Factory workers aren't the only people being shown the door. Increasingly, CEOs who don't deliver the goods are leaving their companies, voluntarily or involuntarily. So-called involuntary successions in 2002 increased by more than 70% to over 200, even though the total number of CEO changes among the world's 2,500 largest publicly traded corporations rose by only 10%, says Booz Allen Hamilton Inc., a management consulting firm. Some 39% of the 253 CEO departures in 2002 were forced, performance-based changes, a significantly higher percentage than 2001's 25% of total departures. Boards of directors are setting higher standards and holding CEOs more accountable. "The CEO mystique has all but evaporated, and director activism has replaced crony capitalism in the boardroom," says Charles Lucier, senior vice president emeritus of Booz Allen Hamilton, who stresses the phenomenon is global. "There is no longer any safe haven for chief executives who can't deliver superior results." Indeed, since 1995, CEO turnover in Europe is up 192% and up 140% in Asia and the Pacific, while turnover in North America, despite several notable cases recently, is up only 2%, the consulting firm says.

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