CEO Turnover: A Sign of Recovery?

Posted by: Jena McGregor on October 1, 2009

It’s been a week of changes at the top, with the number of major companies announcing succession plans, CEO resignations or departures mounting by the day. Under fire at the helm of Bank of America, CEO Ken Lewis says he plans to leave the troubled bank by the end of the year, an earlier departure than previously indicated. On Sept. 30, Chevron said CEO David J. O’Reilly would retire and be replaced by vice chairman John S. Watson. J.P. Morgan shuffled its leadership ranks, offering clues about who will succeed Jamie Dimon, and Hartford Financial named Bank of America veteran Liam McGee to lead the struggling insurance giant.

The faster spinning revolving door could be yet another sign of recovery. Not long ago, I wrote about how slow CEO turnover had been throughout the recession, as boards hesitated to change horses midstream, private equity became a lesser lure, and CEOs saw fewer opportunities elsewhere. Among the 13,000 public companies studied by Liberum Research, which tracks management changes, moves at the top were showing double digit declines in CEO job shifts from 2008 to 2009.

While CEO turnover had been speeding up in recent years—some studies have shown the average tenure for a CEO is just 7 years—it was showing signs of slowing last year. In North America, a Booz & Co. study found that in 2008 CEO tenure was at its longest since 2000, as boards resisted making changes at the top.

While that may seem counterintuitive when so many other employees are losing their jobs, the lull at the top wasn’t expected to last long. Poor performance that might have been enough to muddle through stands out even more when the tide starts rising again. Opportunity for execs to jump ship may simply start surfacing again. And boards who’ve taken a wait-and-see approach are likely to be spurred by action as the mergers & acquisitions race heats up growth eventually gets going again. “I think you’re going to start seeing a lot of change,” said Richard Jacovitz, Liberum’s director of research. “You’re going to see boards say we better start doing something.”

Reader Comments

sam

October 1, 2009 12:08 PM

CEO turnover means that a whole class that has been running things for years is not able to lead us forward. There will be many new faces in many high places. CEO pay will probably decline as well. Clearly they have not been delivering the goods for the amount of money they have been taking. It's silly to give one man credit for everything good that a company does. Everyone in every company contributes to the success, and everyone deserves a fair share.

Squeezebox

October 1, 2009 5:26 PM

Let's hope the boards have enough sense to pay the successors considerably less than their predecessors.

CH

October 20, 2009 4:10 PM

I recently read an article published by CEO Q magazine on economic recovery, the new world order, and the impact of current economic policies. I thought i would share it as it has some very interesting facts and insights on the crisis and expected recovery.

Check it out: http://www.ceoqmagazine.com

CH

October 20, 2009 4:22 PM

I recently read an article published by CEO Q magazine on economic recovery, the new world order, and the impact of current economic policies. I thought i would share it as it has some very interesting facts and insights on the crisis and expected recovery.

Check it out: http://www.ceoqmagazine.com

OXYGEN

March 28, 2010 6:25 AM

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