Recent Trends in CEO Succession

CEO succession

Recent Trends in CEO Succession

CEO succession data provides a unique glimpse into the evolving landscape of corporate leadership. By tracking the measurable trends, corporate governance leaders can better examine the effects of succession timing, industry-specific risks, diversity initiatives, and why certain companies are outperforming others. Each year, The Conference Board releases a report that “analyzes all CEO succession events at S&P 500 companies over the last 16 years.” Here are some highlights from their latest findings.

High turnover rates in retail and consumer product industries indicate that there is a major shift occurring.

Large retailers have seen some of the most drastic changes in consumer behavior over the last two decades. With the move away from traditional box stores and towards online shopping, leaders in this industry have been scrambling to stay competitive while also mitigating the risk that comes with technological advancement. As the Harvard Law School Forum reports, “That these changes require fresh leadership and a renewed strategic vision is confirmed by data on CEO turnover, which, at 20 percent (up from 10.2 percent in the prior year), was by far the highest of all industries in 2016 and among the highest ever recorded by The Conference Board for a single peer group of companies.”

CEOs at better performing companies are keeping their jobs longer than CEOs at lower performing companies.

This seems like a no-brainer, right? However, the data illustrates that the alignment of CEO compensation with measurable performance has turned CEO focus towards long-term financial performance. This shift to strategic leadership “may reflect the pressure that new regulations and shareholders are putting on listed companies.”

Gender diversity growth among S&P 500 companies remains somewhat stagnant.

In 2016, only three women were appointed to open CEO positions in the S&P 500. While this number may seem disheartening to those who are championing the benefits of diverse business leadership, the good news is that the number of female CEOs has markedly grown since 2001 when only 6 women held the highest leadership position among 500 of the largest corporations in America. Women currently hold 26 of those positions, which is still a far cry from gender parity.

The 2008 financial crisis sparked a generational shift in CEO succession.

While the turnover rate for CEOs under 64 averaged 8.1% after the financial downturn, the rate for CEOs over 64 jumped to 25.5%. As the economy began to recover, however, those numbers returned to historical averages—thereby suggesting, “that a generational shift in executive leadership might have run its course amid an improvement in firm performance and general economic context.”

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