The Heat is (Back) On – CEO Turnover Rate Rises to Pre-Recession Levels, Finds Booz & Company Annual Global CEO Succession Study

Spread the love

 Press Release

Booz & Co

Dubai, UAE, 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 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 economic stability 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 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” focuses particularly on the challenges for the new executives, who they are, and how they have performed. The report will be published today, and in the Summer 2012 edition of strategy+business, Booz & Company’s quarterly business and management magazine.

“The first year is a critical one for CEOs, and this applies to the Middle East as well”, said Dr. Karim Sabbagh, Senior Vice President at Booz & Company.  “We have found that getting it right from the get-go is key to the success of the CEO’s tenure. It is a brief window of opportunity during which the CEO must put his or her personal stamp on the company, and set it on course to navigate an uncertain future”.

Among the report’s key findings:

  • Insiders continue to bring higher returns. Although the number of outsider CEO appointments has been increasing over the past five years, insider CEOs continue to perform better, bringing higher shareholder returns and serving longer tenures. Between 2009 and 2011, outgoing insider CEOs delivered a 4.4 percent annual shareholder return above local market indices on average, compared to just a 0.5 percent return from outsiders.
  • Appointment of outsider CEOs remains high. In 2011, 22 percent of new CEOs came  from outside of their organization, which is consistent with 2010 and 2009, but is significantly more than the 14 percent of outsiders appointed in 2007. Notably, appointments of outside CEOs in North America was 22 percent in 2011, while in Western Europe the rate has risen to 31 percent in 2011, up from 24 percent in 2010 and 14 percent in 2007.
  • The Chairman-CEO relationship evolves. Many companies recognize the pressures facing a new CEO and respond with an “apprenticeship” model, appointing the outgoing CEO as Chairman to guide the new incoming CEO. In North America, 37 percent of outgoing CEOs in planned successions were appointed to Chairman to act as a guide to the new CEO in 2011. In Japan, the practice is much more frequent, with 63 percent of companies appointing the outgoing CEO as Chairman, while in Europe only 17 percent of companies did so.
  • Combined Chairman-CEO appointments rose slightly in 2011, but the overall trend is a continuing decline in joint appointments. Even with 2011’s slight rise, the practice of a combined Chairman-CEO appointment has declined over the past 12 years – from 34 percent in 2000 to 14 percent in 2011 globally on average. The declining frequency of combined appointments was most pronounced in Europe, where it fell from 53 percent in in 2000 to just 17 percent in 2011.
  • Challenges for the new executive class. Following the stagnant economic growth that occurred during the recent recession, CEOs in this class face high expectations and new challenges. Many took over globalizing companies or companies in sectors facing disruptive market forces.

Ken Favaro, Booz & Company Senior Partner, added: “The rate of outsiders appointed as CEO has remained steady at 22 percent for the past three years, but that 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.”

High-profile CEO turnovers at large companies dominated public attention over the last year – the new Booz & Company analysis reveals the untold story about how difficult that first year at the top can be.

First Year at the Top: From CEOs Who Have Been There

This year’s report includes the results from detailed interviews with 17 CEOs across a variety of industries and regions, three of whom were from the Middle East. Booz & Company asked what advice these executives had for incoming CEOs. Among the many suggestions, this group encouraged the new executives to make necessary personnel changes swiftly in their new roles but to 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 17 CEOs offers some very 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.”

One piece of advice from a Middle East-based CEO was to ensure the organization had the right capabilities to execute its new strategy from day one.   “It is essential for companies to build and even acquire new talent to develop a cohesive team with the necessary capabilities to launch the institution on its path to success and earn its right to win,” explained Sabbagh.

Based on a series of recommendations from seasoned executives for the new class of CEOs, the most important pieces of counsel that new (or aspiring) CEOs should consider include:

1)      Clean house (selectively) – deal with the obvious executive team changes as early as possible.

2)      Not so fast on the strategy shift – be wary of changing strategy too quickly, even if you think the current strategy is wrong, and make sure the company is on a sound footing before sending it off in a new direction.

3)      Step out of your strike zone – make sure you understand how every part of the company operates, and how it is performing.

4)      Be transparent – be as open as possible about plans and motives with all the critical players, and move decisively in making the most pressing changes.

5)      Don’t listen to everybody – everyone has an agenda, but not all of them are in the best interests of the CEO or the company you have been hired to run.

6)      Find a sparring partner with whom you can discuss plans openly – and who has no agenda other than your success.

7)      Get your home life in order – manage your time and your personal life with care.

The first year is career-defining, and establishing necessary groundwork for high performance is crucial to success, especially considering the tumultuous environment into which most CEOs are entering.

Additional Study Findings:

CEO turnover rate is highest at the largest companies

  • CEO turnover rate was highest among the top 250 companies by market capitalization – just over 14 percent on average over 12 years – and nearly 2 percent higher than companies ranked 251-2,500 by market capitalization from 2000-2011.
  • M&A-related turnover is traditionally higher among smaller companies, with 2.2 percent of turnover among the bottom 2,000 companies stemming from consolidation, compared to 1.3 percent at the top 100 companies.

Turnover was highest in sectors that faced disruptive market forces

  • Turnover in the energy, telecoms and utilities sectors were 19, 18 and 16 percent, respectively, in 2011.
  • In the diversified sector, leadership changes took place at a rate of 6 percent only.

Succession rates are felt unequally among the largest emerging markets

  • Since 2006, the number of companies among the top 2,500 based in BRIC and emerging countries has more than doubled.
  • Turnover among companies based in Brazil, Russia, and India in 2011 took place at a rate of 22 percent, while the rate in the US, Canada and Western Europe was just over 13 percent.
  • Chinese CEO turnover rate was only 6.8 percent in 2011.

Insiders consistently serve longer tenures

  • Since 2000, insiders have served their companies as CEOs for at least one more year on average than outsiders.

The full report can be downloaded by visiting the Booz & Company website The New CEO’s First Year. A supplementary article, “CEO Succession Virtual Roundtable,” contains additional insights from the 18 CEO interviews we conducted, and can be downloaded here .


This 2011 CEO Succession study identified the world’s largest 2,500 largest public companies, defined by their market capitalizations (from Bloomberg) on January 1, 2011. To identify companies among the top 2,500 that had experienced a chief executive succession event, Booz & Company cross-checked data across a wide variety of printed and electronic multi-language sources. Additionally, the company conducted electronic searches for announcements of retirements or new appointments of chief executives, presidents, managing directors and chairmen during calendar year 2011. For a listing of companies that had been acquired or merged in 2011, Booz & Company used Bloomberg. Booz & Company also conducted supplemental research for regional CEO changes not identified by other sources. Total shareholder return was sourced from Bloomberg and includes reinvestment of dividends (if any). Total shareholder return data were then regionally market-adjusted and annualized. To distinguish between mature and emerging companies, Booz & Company followed the United Nations Development Program 2011 ranking.

About Booz & Company

Booz & Company is a leading global management consulting firm focused on serving and shaping the senior agenda of the world’s leading institutions. Our founder, Edwin Booz, launched the profession when he established the first management consulting firm in Chicago in 1914. Today, we operate globally with more than 3,000 people in 60 offices around the world.

We believe passionately that essential advantage lies within and that a few differentiating capabilities drive any organization’s identity and success. We work with our clients to discover and build those strengths and capture the market opportunities where they can earn the right to win.

We are a firm of practical strategists known for our functional expertise, industry foresight, and “sleeves rolled up” approach to working with our clients. To learn more about Booz & Company or to access its thought leadership, visit Our award-winning management magazine, strategy+business, is available at

Facebook Comments