CEOs under fire to perform – or else
CEO turnover set a record in 2006 and could reach another one this year as investors demand higher returns.
from the June 20, 2007 edition
Page 2 of 3
These bids by big investment funds often aren't hostile. And sometimes the CEO remains in office even as the firm changes from being a publicly traded company to a privately held one. But the growing power of private equity has changed the marketplace for corporate control.
"You can have another team come in from the outside and say, 'We think we can make more of the business opportunities that this firm faces,' " says Clifford Smith, professor at the University of Rochester's Simon School of Business.
Even if no offer is on the table, a CEO knows that someone backed by big money might be plotting an alternative vision for the firm.
By Challenger's count, 1,478 top executives in the US left their jobs in 2006, whether by retiring, resigning, being fired, or being shoved aside in a merger. That exceeded previous highs of 1,322 in 2005 and 1,106 in 2000.
The consulting firm Booz Allen Hamilton has tallied the numbers a different way, taking a global view but focusing on just the biggest 2,500 firms. In a study released four weeks ago, it found:
•Globally, 357 CEOs at these large corporations left office in 2006, a 1.2 percent decrease from 2005.
•The number of CEOs leaving because of conflicts with the board has grown from 2 percent in 1995 to 11 percent between 2004 and 2006. Such boardroom power struggles have been particularly common in Europe.
•In 1995, one in eight departing CEOs was forced from office – in 2006, nearly one in three left involuntarily.
Despite all the job churn, the majority of corporate leaders get more than a season or two at the helm. The Booz Allen study finds that the average CEO tenure is nearly eight years.
RSS feed
