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A new study by management consultants Booz Allen Hamilton found that involuntary executive turnover—ousters, firings, and the ever-euphemistic “pushed out”—is way up. Between 1995 and 2006, the study reports, performance-related turnover increased by 318 percent. “In 1995, only one in 8 departing CEOs was forced from office,” write Chuck Lucier, Steven Wheeler and Rolf Habbel, each senior vice presidents at Booz Allen, in the report, which will appear in the June issue of Strategy + Business. “In 2006, nearly one in three left involuntarily.”
The study was reported in the New York Times this morning. But there are some other interesting nuggets from the research that were not covered. For one, boardroom infighting is prompting more departures, with conflicts leading to 11 percent of CEO ousters in 2004 to 2006, up from 2 percent in 1995. The study also found that “independent chairmen are best:” Last year, the study found, all of the underperforming CEOs in North America that also had long tenure were either also the company’s chairman or served under a chairman who once was a CEO at the company.
The authors of the report, titled “The Era of the Inclusive Leader,” place a milestone on Home Depot executive pay poster boy Robert Nardelli’s departure in January. “The last gasp of the old CEO imperium, in fact, may have been Nardelli’s final annual meeting on May 25, 2006, where he presided without any other directors present, declined to discuss the company’s performance or his own compensation, and refused to answer shareholder questions.” They instead herald the coming of the “inclusive” CEO, who is responsive to employees, shareholders, and activist investors such as hedge funds, and welcomes vigorous debate with his or her board. At Home Depot, early signs are the new CEO, Frank Blake, is indeed of that new breed—he has a heavily performance-tied compensation package, an activist investor on his board, and has dished out cash to stores to improve employee morale. Home Depot’s annual meeting is Thursday. Will it be a milestone for inclusivity?
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