Fewer CEOs Forced from Office in 2009, Reports Booz & Company in 10th Annual Global CEO Succession Study

A decade of data reveal global norms emerging; chief executives asked to do more, faster.

New York, May 18, 2010 – While CEO succession rates at the world’s 2,500 largest companies held steady at a high annual rate of 14.3% in 2009, the number of chief executives actually forced from office fell in nearly every region and industry, according to Booz & Company’s 10th annual CEO Succession Study. The report finds two clear trends are reshaping the life of the CEO in the 21st century. First, while succession rates have standardized across regions and industries, boards, regardless of country or sector, are converging on the same preferences for hiring insiders and splitting the CEO/Chairman roles. Second, CEOs are being asked to deliver results in a shorter period of time. 

In 2009, forced CEO turnover rates fell to 3.3% globally, its lowest level since 2003, following a decade-high rate of 5.1% in 2008. Last year, overall succession rates, which include planned and merger-driven departures, fell 2.4% in North America and half a percentage point in Japan, but held stable in Europe and increased 2.3% in the rest of Asia.

Booz & Company’s study of worldwide CEO succession patterns examines the degree, nature and geographic distribution of chief executive changes among the world’s 2,500 largest public companies.  This year’s report, “CEO Succession 2000-2009: A Decade of Convergence and Compression,” analyzes the evolution of CEO roles around the globe based on 10 consecutive years of turnover data. It will be published in the Summer 2010 edition of strategy+business, Booz & Company’s quarterly thought leadership magazine, on newsstands May 25, 2010.

Over the decade, CEO succession patterns have converged in three ways, according to Booz & Company:

  • An equalization of CEO turnover rates, no matter the region or industry. The percentages of CEOs replaced each year in Europe and Asia (excluding Japan) are now at levels closer to those in North America and Japan. Similarly, turnover rates have harmonized across industries, with 10-year averages settling between 12 and 14% for all except telecommunications (16.9%).
  • A trend toward appointing insiders. Boards have picked insiders over outsiders to lead their companies 80% of the time since 2000, not surprising in light of an average 2.5% in market-adjusted shareholder returns, compared with an anemic 1.8% for outsider CEOs over the past seven years.  “Companies that choose an outsider to lead may expect to pay a price in performance,” said Gary Neilson, Senior Partner at Booz & Company. “The allies and contacts that an insider brings to the post make a difference to the bottom line. Boards looking to bring in an outsider’s perspective have to seriously consider whether the price is worth the tradeoff.”
  • A separate Chairman. In 2000, roughly half of North American and European CEOs held the dual roles of CEO and Chairman. At decade’s end, that number fell to 16.5% and 7.1% for these regions, respectively.  

The Booz & Company study found a simultaneous wave of compression reshaping and refocusing the job itself:

  • CEOs must do more, and faster. In just the past decade, boards have shaved nearly two years off the average CEO’s tenure, from 8.1 years to 6.3 years. And while they are leaving office at about the same age as they have historically, today’s departing CEOs were older when they entered office: 53.2 years for those who exited in 2009 versus 50.2 for those who exited in 2000.
  • More chiefs are "apprentices." Having split the roles of Chairman and CEO, North American and European companies are increasingly appointing the outgoing CEO as Chairman to apprentice the incoming leader. However, the “apprenticeship” model does not produce consistently superior returns. In fact, on average, apprenticed CEOs underperformed non-apprenticed CEOs by 1.3% per year.
  • No excuses for poor performance. CEOs forced from office significantly underperformed those leaving on their own terms. Never was this more dramatic in the past decade than 2009, when chiefs departing on a planned basis delivered median market-adjusted shareholder returns of 6.0% compared with -3.5% for terminated CEOs.

“New CEOs have fewer years to execute a game-changing strategy than their predecessors,” said Booz & Company Senior Partner Per-Ola Karlsson. “They need to balance clarity and boldness with a realistic understanding of what is possible in their organizations.” 

To that end, the report outlines four steps that today’s incoming CEO class needs to be successful.  Chief executives need to:

  1. Focus on what no one else can do and wisely delegate the rest. Regardless of the company, that will include adjudicating what issues to work on and what’s assigned to others. Also, if big strategic changes are necessary, they can only come from the top. 
  2. Engage the board as a strategic partner, which means both treating its members as they want to be treated while simultaneously leading it to be bolder than it otherwise may be. 
  3. Find the right pace of change within the company. While every CEO must traverse the learning curve quickly, making premature pronouncements about changes can create otherwise avoidable problems. 
  4. Get the culture working with you by understanding the informal, emotional elements of the organization. Informal interactions such as networks, peer-to-peer relationships, work habits and norms and communities of interest are as important as the formal, rational elements.

Additional study findings:

  • Of the 357 succession events that occurred in 2009, 228 were planned (retirement, illness, long-expected changes), constituting the bulk of departures, particularly in Japan (84%) and North America (71%). There were 83 forced departures (where a board removes a CEO for poor financial performance, ethical lapses or irreconcilable differences), and 46 were driven by mergers.
  • Financial services is currently the most volatile industry for CEO turnover. In 2009, the rate of financial services CEOs leaving office was 17.2%— well above the 14.3% global average and significantly higher than the industry’s average turnover rate over the past decade. The rate of forced departures was also well above the norm (5.3% vs. 3.3%). By contrast, CEOs in healthcare enjoyed the greatest stability in 2009, with an overall 10.3% turnover rate and only 0.6% of CEOs forced from office.
  • Telecommunications, however, stands apart from other industries in terms of its 10-year turnover rate (16.9% vs. 13.6% average), and its share of forced turnover (54%) — by far the highest of the 10 industries assessed, and the only industry in which forced turnover is greater than that of planned succession.


This study identified the world’s largest 2,500 largest public companies, defined by their market capitalizations (from Bloomberg) on January 1, 2009. To identify companies among the top 2,500 that had experienced a chief executive succession event, Booz & Company cross-checked data across a wide variety of printed and electronic multi-language sources. Additionally, the company conducted electronic searches for announcements of retirements or new appointments of chief executives, presidents, managing directors and chairmen. For a listing of companies that had been acquired or merged in 2009, Booz & Company used Bloomberg. Booz & Company also conducted supplemental research for regional CEO changes not identified by other sources. Total shareholder return was sourced from Bloomberg and includes reinvestment of dividends (if any). Total shareholder return data were then regionally market-adjusted and annualized.