New York, NY, May 24, 2012 — As the worldwide economy began to recover last year, CEO turnover at the world’s largest 2,500 public companies returned to rates seen during the pre-recession years, according to Booz & Company’s 12th annual CEO Succession Study. In 2011, 14.2 percent of CEOs at the world’s largest companies were replaced, which matches the historical seven-year average of just more than 14 percent, but is sharply higher than the 11.6 percent turnover rate in the crisis year of 2010.
“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 leadership change when macroeconomic strength returns and company outlooks improve,” said Per-Ola Karlsson, Booz & Company Senior Partner, Managing Director of Europe. “That the overall turnover rate is back to historical levels suggests that some companies are making a real effort to rethink strategy and drive performance.”
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” reveals the challenges for the new class of CEOs who came into office in 2011, analyzes trends in global CEO turnover, and distills important advice from veteran CEOs. The report will be published today, and in the Summer 2012 issue of strategy+business, Booz & Company’s quarterly business and management magazine.
Among the report’s key findings:
Ken Favaro, Booz & Company Senior Partner, said: “The rate of outsiders appointed as CEO is demonstrably higher than it was before the recession began, which suggests that companies are seeking leadership experience from outside their industries and markets. However, our study finds that insider CEOs continue to perform better, bringing higher shareholder returns and serving longer tenures. These countervailing trends—better-performing insiders and increasing numbers of outsiders—are currently at a crossroads and should be a consideration for any board thinking about making a change.”
First Year at the Top: From CEOs Who Have Been There
This year’s report includes results from detailed interviews with 18 CEOs around the world and across a variety of industries, and it reveals the untold story about how difficult that first year at the top can be. Among the many suggestions these executives had for new CEOs: Make necessary personnel changes swiftly, but change strategy slowly while establishing trust through transparency.
““As the rate of CEO turnover returns to historical levels, we are seeing executives face more intense pressure to perform during their first year,” said Gary Neilson, Booz & Company Senior Partner. “Our roundtable of 18 CEOs offers some practical guidance for new CEOs and allows them to learn from their lessons as they look back on navigating their first year. These are gems of unvarnished advice.”
The full report and its methodology can be downloaded by visiting the Booz & Company website www.booz.com. A supplementary article, “Navigating the First Year: Advice from 18 Chief Executives,” contains additional insights from the 18 CEO interviews, and can be downloaded here >
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