London, May 24, 2012 – As the global economy begins to recover, CEO turnover at the world’s largest 2,500 public companies returned to rates seen during pre-recession years, according to Booz & Company’s 12th annual CEO Succession Study. Globally, CEO turnover is now at 14.2 per cent, up 2.6 per cent from 2010; while in the UK, this figure is even higher at 14.7 per cent.
- CEO turnover rates return to pre-recession levels - at the world’s largest 2,500 public companies, CEO turnover globally is now at 14.2 per cent, up 2.6 per cent from 2010; while in the UK, this figure is 14.7 per cent – higher than any other Western European country
- Insider CEOs continue to deliver higher returns - although the number of outsider CEO appointments has increased over the past five years, insider CEOs are proven to perform better, bringing higher shareholder returns and serving longer tenures
- Booz & Company offers advice for new CEOs -from tops tips collected from interviews with 16 leading CEOs surveyed for this year’s report
London, May 24 2012 –As the global economy begins to recover, CEO turnover at the world’s largest 2,500 public companies returned to rates seen during pre-recession years, according to Booz & Company’s 12th annual CEO Succession Study. Globally, CEO turnover is now at 14.2 per cent, up 2.6 per cent from 2010; while in the UK, this figure is even higher at 14.7 per cent. These findings suggest that British companies are feeling more confident about making leadership changes and rethinking who is in charge to drive performance. Ashley Harshak, Partner at Booz & Company, said “Boards are more likely to keep their chief executives during times of economic uncertainty in order to maintain stability, but they are more willing to make a change when economic stability returns and company outlooks improve. In the UK we saw big names such as Philip Clarke taking over from Sir Terry Leahy at Tesco, and Michael Geoghegan who was succeeded by Stuart Gulliver at CEO of HSBC.”
Booz & Company’s annual 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, “The New CEO’s First Year” focuses particularly on the challenges for the new executives, who they are, and how they have performed. Chief Executive of BT Group Ian Livingston commented on his first year in office: “The best advice I got was from CFOs and HR directors, because they’re people who have a view across the entire business.” The report will be published today, and in the Summer 2012 edition of strategy+business, Booz & Company’s quarterly business and management magazine.
Globally, insider CEOs who were appointed from within the company, continue to bring in higher returns than outsider CEOs. In 2011, outgoing insider CEOs delivered a 4.4 per cent annual shareholder return on local market indices on average, compared to just 0.5 per cent from outsiders.
Despite this, the appointment of outsider CEOs remains high globally with 22 per cent of new CEOs coming from outside their organisations, up from just 14 per cent in 2007; in the past five years, the share of outsiders has grown the most on average in Utilities, Financial Services and Telecommunication Services. In Western Europe, this figure rose to 31 per cent, up from just 24 per cent in 2010. Harshak, added, “The appointment of outsider CEOs is on the rise because in this time of economic uncertainty, industries in turmoil often look for fresh insights and expertise from outside their current sector and market. However, these countervailing trends—better-performing insiders and increasing numbers of outsiders -should be a key consideration for any board thinking about making a change at the top."
Other key findings from the study:
- The Chairman-CEO relationship evolves - many companies appoint the outgoing CEO as Chairman to guide the new incoming CEO. This is most popular in Japan, with 63 per cent of companies doing this, while in Europe only 17 per cent of companies did so
- Combined Chairman-CEO appointments rose slightly in 2011, but the overall trend is a continuing decline in joint appointments - from 34 per cent in 2000 to 14 per cent in 2011. The decline was most pronounced in Europe, falling from 53 per cent in 2000 to just 17 per cent in 2011
- By sector – the top 3 for turnover in the UK were Healthcare, Telecommunication Services and Utilities
- The average age of UK CEOs leaving office is older – 58.4 years old compared to 56 in all of Europe
- The tenure of UK CEOs is slightly longer than in the rest of Europe – 7.2 years on average in the UK, compared to 6.9 years in all of Europe
Click here for more information or to download the full report.