PR Newswire
NEW YORK, Oct. 3, 2018
NEW YORK, Oct. 3, 2018 /PRNewswire/ -- According to a new report by The Conference Board, the exceptional longevity of the bull market that followed the Great Recession appears to have stretched leadership tenures at large U.S. public companies, resulting in a higher average CEO age.
The study, CEO Succession Practices: 2018 Edition, developed in collaboration with Heidrick & Struggles, annually documents and analyzes chief executive officer succession events of S&P 500 companies, updating a historical database first introduced in 2000. In 2017, there were 54 CEO succession cases among S&P 500 companies.
In 2009, at the peak of the Great Recession, the typical CEO of an S&P 500 held his or her position for 7.2 years—the shortest average tenure ever reported by The Conference Board. However, CEO tenure started to rebound soon after, rising to 10.8 years by 2015. In 2017, departing CEO tenure was the highest recorded since 2002, at nearly 11 years. Consistent with this evidence, in 2017 the average age of a sitting S&P 500 CEO was 58.3 years, more than two years older than the average CEO in 2009.
"CEO succession planning is among the most challenging tasks required of the board of directors, with important implications on the organization, its employees, and culture," said Matteo Tonello, Managing Director of Corporate Leadership at The Conference Board and a co-author of the report with Jason D. Schloetzer, Professor at Georgetown University's McDonough School of Business. "Our findings suggest that a new generational change in the top business leadership may be underway. Boards of directors should therefore be aware of the possible increase in demand for top talent and have a sound CEO succession plan in place to retain a competitive advantage over their peers."
A related finding from the research study is the dramatic widening of the gap between CEO exits from better-performing companies and under-performing ones. The succession rate of better-performing companies declined to 6.8 percent in 2017, the lowest since 2002 and much lower than the average of 9.4 percent calculated for the entire 2001-2017 period. By way of comparison, in 2017 the succession rate for better performing companies was more than three times lower than the 22.1 percent registered for underperforming companies. "In today's governance and investment climate, CEOs who achieve better performance benefit from even greater job stability while underperforming CEOs are even more exposed to public scrutiny. Such scrutiny may ultimately limit the discretion that the board of directors can exercise to keep the underperformer," said Schloetzer.
Other key findings from the report:
CEO Succession Practices was made possible by a research grant from executive search and leading advisory firm Heidrick & Struggles. "As advisors to top CEOs and leadership teams around the world, we see first-hand how disruption can be both a threat and an opportunity. Thoughtful and proactive succession planning can help boards mitigate risk and prepare for a wide range of scenarios. The latest report findings suggest that succession planning will become even more critical as nearly every industry faces the threat of disruption. In response, S&P 500 companies are increasingly turning to external talent to fill CEO roles," said Jeff Sanders, Vice Chairman and Co-Managing Partner of the CEO & Board Practice, Heidrick & Struggles. "Heidrick & Struggles is proud to support research providing data and analysis around how companies are addressing leadership changes and accelerating C-suite preparedness," said Bonnie Gwin, Vice Chairman and Co-Managing Partner of the CEO & Board Practice, Heidrick & Struggles.
Source: CEO Succession Practices: 2018 Edition / The Conference Board
About The Conference Board
The Conference Board delivers trusted insights for what's ahead. We connect senior executives across industries and geographies to share ideas, develop insights, and recommend policy to address key issues. Our mission is to help leaders anticipate what's ahead, improve their performance and better serve society. The Conference Board is a non-partisan, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States. http://www.conference-board.org.
To enable peer comparisons among its member companies, The Conference Board offers a portfolio of benchmarking data and analysis on corporate governance, proxy voting, sustainability and citizenship. It can be accessed at www.conference-board.org/data/corporatebenchmarking
About Heidrick & Struggles:
Heidrick & Struggles (Nasdaq: HSII) serves the senior-level talent and leadership needs of the world's top organizations as a trusted advisor across executive search, leadership assessment and development, organization and team effectiveness, and culture shaping services. Heidrick & Struggles pioneered the profession of executive search more than 60 years ago. Today, the firm provides integrated leadership solutions to help our clients change the world, one leadership team at a time.® www.heidrick.com
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SOURCE The Conference Board
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