'Revolving Door' Syndrome

Feb. 11, 2006
CEO churn in high gear, survey shows. Turnover can be costly.

For CEOs tired of unrelenting criticism about how they are sitting pretty with fat paychecks and unquestioned authority, there is fresh ammunition that shows many of them are not sitting at all. They're moving on.

More than 10% of CEOs at the largest 1000 U.S. companies were newly named to their positions in 2005 (129 new CEOs in all), according to public relations firm Burson-Marsteller's 2005 CEO Succession Tracking Survey. And over the last six years, nearly half of the largest firms announced new leaders at their companies. Some 470 new CEOs were named in that time frame.

"If the rise in CEO departures continues at this rate, companies will have CEOs departing every hour of the work week by 2015," says Leslie Gaines-Ross, Burson-Marsteller's chief knowledge and research officer worldwide.

Regardless of the reason for the departure, CEO turnover can translate to high costs -- from expensive severance benefits to customer and financial-community concerns, to lowered brand reputation, notes the public relations firm.

Two other survey items of note: Among new CEOs named in 2005, 43% were executives either from outside the company or who had worked inside the company for less than three years. In addition, the average time between the first public announcement of a new CEO to that person's first day in office is one month, a time frame that has remained steady since 2000.

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