Report: Fewer CEOs of Large U.S. Companies Lost Their Job in 2013

New York — April 9

The percentage of S&P 500 companies that fired their CEO in 2013 was the lowest since 2010, according to the 2014 edition of “CEO Succession Practices,” a report released by The Conference Board.

The study reveals that only 23.8 percent of all CEO turnover events reported last year by companies in the index were due to dismissal, compared to the 24 percent recorded in 2010 and 25.5 percent in 2011. As a result, CEO tenure grew in 2013 to 9.7 years, reversing a decade-long declining trend.

While improved overall financial performance is the most likely explanation, this finding is also indicative of the regained trust in business progressively shown by investors after the financial market crash of 2008.

The Conference Board report documents CEO turnover events at S&P 500 companies. The new edition contains a historical comparison of 2013 CEO successions with data dating back to 2000. In addition to analyzing the correlation between CEO succession and company performance, the report discusses age, tenure and the professional qualifications of incoming and departing CEOs.

It also describes succession planning practices — including the adoption rate of mandatory CEO retirement policies and the frequency of performance evaluations — based on findings from a survey of general counsel and corporate secretaries at more than 150 U.S. public companies.

Additional key findings:

The number of companies in the S&P 500 that also elected their new CEO as chairman of the board of directors was down significantly in 2013. Only 9.5 percent of the CEO successions at S&P 500 companies in 2013 involved the immediate joint appointment of the CEO as board chairman, down from 18.8 percent in 2012 and 19.2 percent in 2011.

Most departing CEOs remained as board chairman for at least a brief transition period. Based on a review of 2013 succession announcements, 52.4 percent of departing CEOs remained as board chairman for at least a brief transition period, typically until the next shareholder meeting. This rate is higher than the roughly 33 percent reported in 2012.

While employee tenure across the labor market has stayed relatively stable, the average tenure of a departing CEO has declined. The average tenure of a departing S&P 500 company CEO has decreased in recent years, from about 10 years in 2000 to 8.1 years in 2012. In contrast, employee tenure across the broader labor market has remained relatively stable during the past 25 years, averaging 5.1 years in 2008, compared with 5 years in 1983.

The year 2013 was an outlier, with an average departing CEO tenure of 9.7 years — the longest since 2002, presumably due to CEO retirements that were delayed for economic considerations during recent global economic turmoil.

The overall upward trend of outsider promotions continued through 2012, although the rate of outside appointments has stabilized in recent years. The upward trend recorded since the 1970s in the appointment of “outsiders” — those who had served less than one year with the company — to the CEO role continues, but the momentum has slowed.

In 2013, 23.8 percent of incoming CEOs were brought in from outside the company, a modest decrease from the 27.1 percent rate in 2012. The remaining 76.2 percent of incoming CEOs in 2013 were “insiders,” or senior executives promoted to the CEO position after serving at least one year with the company.

Source: The Conference Board