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Why have more than 1,300 CEOs left their post in 2019?


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Why have more than 1,300 CEOs left their post in the past year?

“Boards have been too compliant and they’re finally recognizing it’s their job to be vigilant about chief executive misbehavior,” said one advocate for corporate governance.
 

A unique conference table set up for a meeting. Mint Images / Getty Images/Mint Images RF

 
 
Nov. 6, 2019, 7:57 AM EST
By Claire Atkinson

Chief executives are leaving in record numbers this year, with more than 1,332 stepping aside in the period from January through the end of October, according to new data released on Wednesday. While it's not unusual to see CEOs fleeing in the middle of a recession, it is noteworthy to see such a rash of executive exits amid robust corporate earnings and record stock market highs.

Last month, 172 chief executives left their jobs, according to executive placement firm Challenger, Gray & Christmas. It's the highest monthly number on record, and the year-to-date total outpaces even the wave of executive exits during the financial crisis.

 

The list of CEOs stepping down includes some who have left amid controversy. McDonald’s announced on Sunday it was "separating" Steve Easterbrook as president and CEO after he admitted having a consensual affair with another employee. WeWork's founder and CEO Adam Neumann stepped down two weeks ago, accepting a $1.7 billion golden parachute in exchange for walking away from a disastrous IPO. That same week, Kevin Plank, the billionaire founder of leisure wear firm Under Armour, confirmed he was stepping down. Under Armour confirmed this week it is the subject of a federal accounting probe. Nike's longtime CEO Mike Parker resigned the same day, as did the head of eBay.

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Controversy or not, it's a pace not seen since 2002. The last big wave of CEO departures came in 2008, at the start of the financial crisis, according to the company’s data.

“You expect a high turnover during a recession period," Andrew Challenger, the company's vice president, told NBC News. "To see more turnover during a period where companies are doing very well is surprising.”

However, plump exit packages can make it tempting for chief executives to throw in the towel. Fears of an impending recession may also prompt leaders to step down to get ahead of risks to their legacy, said Nell Minnow, an advocate for corporate governance and vice chair of ValueEdge Advisors.

The #MeToo movement has felled a fair number of leaders, from CBS chairman and CEO Les Moonves to billionaire casino magnate Steve Wynn and Intel's chief Brian Krzanich. It's a sign not just of heightened accountability, but of investor pressure, experts say.

“You could say there’s a cancel culture in the boardroom,” said Minnow. “Boards have been too compliant and they’re finally recognizing it’s their job to be vigilant about chief executive misbehavior.”

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Posted (edited)

The exodus continues in 2020:

 

CEO Departures Begin 2020 at Record Pace

Paul Ausick
February 13, 2020 8:25 am
Last Updated: February 13, 2020 8:27 am

The number of U.S. chief executive officers who lost or left their jobs in January set a monthly record of 219, more than any other month since outplacement firm Challenger, Gray & Christmas began tracking the data in 2002. The previous record was 172 departures in October of last year.

The January total was 39.5% higher year over year, and the month-over-month total was 37% higher than December’s total of 160. The fourth-quarter 2019 total reached an all-time record 480. The January number is already nearly half that record total.

 
 
 
 
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In all of 2019, a total of 1,640 CEOs left their jobs, a surge of nearly 13% from the prior year’s total of 1,452. Of the 2019 total, three were due to allegations of sexual misconduct. In 2018, 11 CEOs left their jobs following allegations of sexual misconduct.

Vice president Andrew Challenger noted: “January is typically a busy month for CEO turnover, as companies make leadership changes after assessing business conditions at the end of the fiscal year. January is the beginning of the fiscal year for many companies, and a good time to make decisions about the direction of the company.”

The average age of a departing CEO in January was 55.7 years, compared to an average age of 60.7 among 2019’s departing chiefs. The average tenure of these CEOs was 10.6 years last month, compared with 11.6 years in January 2019.

 

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Of the CEOs who departed in January, 49 retired and 16 found new opportunities. According to Challenger data, the most frequent reason for a CEO departure in January was stepping down to a different position in the company. A total of 79 CEOs “stepped down” last month.

Andrew Challenger commented: “Most companies are holding on to their CEOs in some capacity, whether they transition to the Board, remain in a consulting role, or lead a different area of the business. This suggests that while a record number of CEOs are leaving that post, the vast majority of companies are generally happy with their performance.”

The number of departing CEOs who were replaced by outsiders totaled 107 in January. In 2019, the full-year total was 784. By gender, 35 women replaced men in the top job, while 21 men replaced women and 13 women replaced other women. Men replaced men 129 times in January, and 24.2% of all new CEOs named last month were women. Note that most of the highest paid CEOs last year were men.

The government/nonprofit sector experienced 41 CEO changes in January, up from 29 in the same month a year ago.

In the technology industry, 35 CEOs left their positions last month, compared with 10 in January of 2019 and 16 in December last year. For all of 2019, CEO departures in the industry rose by 42% compared to 2018.

According to Challenger, just one CEO was terminated in January, while scandals forced out three CEOs in the month.

California companies saw the highest number of CEO changes last month with 35, nearly double the number replaced in December. Companies in New York saw 17 CEO departures last month, while Texas and Massachusetts each reported 14 changes in January.

Edited by Theseus
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