CEO Succession Practices: 2017 Edition

Harvard Law School Forum on Corporate Governance, 07/31/2017

In particular, last year the CEO of poorly performing companies had a 40% higher probability of being replaced than in 2015, and a 60% higher probability of being replaced than CEOs of better-performing companies.

Communication practices more commonly include providing earlier notice of the CEO succession event, including the description of the role performed by the board of directors in the CEO succession process, and offering more details on the reasons for the transition. The immediate appointment of the incoming CEO as board chairman has become a rare exception, as proxy advisors and the investment community increasingly demand independent board leadership. Only 6.4% of the successions in 2016 involved the immediate joint appointment of the new CEO as board chairman-the lowest level ever reported by The Conference Board.

Key Findings

The highest impact of female CEO departure was seen in 2010, when 4 of the then 12 women CEOs in the S&P 500 left their position; in the same year, as in 2015, only one of them was replaced with another woman.

Following the 2008 financial crisis, The Conference Board study reported an acceleration of the rate of succession of CEOs aged 64 years or older: in the 2009-2014 period, their average turnover rate was 25.5%, compared to the 8.1% seen for younger CEOs.

Departing CEO tenure in 2016 was 9 years, but 5% of S&P 500 companies are led by CEOs with tenures of 20 years or longer.

Continue reading here.

2019-03-05T09:40:49-05:00
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