Corner Office News: CEOs Serving Shorter Terms

April 13, 2012
Average tenure of a CEO declines to 8.4 years.

A new survey by the Conference Board finds the average tenure of CEOs in S&P 500 companies declined to 8.4 years in 2011 from 10 years in 2000.

What accounts for shorter stays in the corner office? "The stronger independence and accountability of directors registered during the last decade and increased scrutiny from shareholders and activists might motivate corporate boards to be more inclined to dismiss a CEO who is performing below expectations," said Matteo Tonello, managing director of corporate leadership at the Conference Board and a co-author of the report, "CEO Succession Practices."

Also, he said, "the pressure of serving as the CEO of a large company in an increasingly competitive global marketplace could contribute to voluntarily shorter tenures, suggesting that CEOs are leaving on their own terms after fewer years in the position."

In 2011, 55 CEOs in the S&P 500 left their post, a rate consistent with the past decade.

On average during the period 2000-2011, CEOs left poor performing companies at a higher rate (14%) than those at better performing companies (9.7%).

Age was also a factor in CEO succession, with those at least 64 years of age leaving at an average rate of 18.4% while younger CEOs averaged 10.1%.

The Great Recession seemed to have relatively little impact on CEO dismissal rates. From 2000 to 2005, CEOs were dismissed at a rate of 28.6%, while the rate for 2006 to 2011 was 27.9%.

What separates succession practices in high-performing companies from their less stellar peers? Melissa Aguilar, a Conference Board researcher and co-author of the report, said the "tendency to appoint a seasoned executive as incoming CEO is related to firm performance." She noted: "The data shows better-performing companies appointed seasoned executives-those with tenure in the company exceeding 20 years- far more frequently than their poor-performing counterparts."

See also:

CEOs Offer Plan to Revitalize U.S. Economy

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