Why Global CEOs are making planned exits

Significantly more top global executives are making planned exits from their companies instead of being forced to leave, a new study suggests.

The vast majority – 70 per cent – of CEO turnovers at the world’s largest companies in 2013 were planned events, as opposed to forced turnovers or the result of mergers, according to the newly released 2013 Chief Executive Study from Strategy& (formerly Booz & Company).

“The high proportion of planned turnovers is a strong signal that companies are continuing to take an active, considered approach to putting in place new leadership,” said Gary L Neilson, Senior Partner at Strategy& and co-author of the 14th annual global Chief Executive Study.

The study, which examines trends and patterns among incoming and outgoing CEOs of the world’s 2,500 largest public companies, also reveals that 76 per cent of incoming CEOs were “insiders” who were promoted from within the company.

The current study looks at women CEOs over the past 10 years as well as overall succession trends with a focus on 2013’s incoming class of CEOs.

CEO turnover at the world’s largest companies in 2013 decreased slightly to 14.4 per cent from 15 per cent in 2012 – well within the range of turnover generally expected during non-recession periods. “While the CEO succession rates in the Middle East continue to be higher than the global average, we have seen a meaningful decline this year in this region as well and are now approaching the global levels,” said Per-Ola Karlsson, Senior Partner at Strategy&, co-author of the report and the Managing Director of Dubai.

The study’s findings also suggest that the “global CEO” as commonly thought of is a rarity – the trend seems to be “local” and “native.” In addition to the fact that 76 per cent of new CEOs in 2013 were insiders (compared with 71 per cent in 2012), 80 per cent were nationals of the same country as the company’s headquarters and 65 per cent did not have experience working abroad.

“Companies continue to select CEOs who are familiar faces, particularly when it comes to nationality and international experience, suggesting that the ‘global CEO’ is more mythical than real,” said Karlsson.

Among other findings, the median age of incoming CEOs was 53 and the tenure has remained relatively steady over the past five years – but rose slightly in 2013 to the 14-year median of five years.

The study includes two other findings that illuminate what companies are looking for in a CEO. First, the percentage of CEOs appointed with joint CEO/Chairman titles decreased for the third straight year to an all-time low of 9 per cent.

“The fact that joint appointments as CEO and chairman is at a low-level is a sign of good governance, reflecting increased accountability and decreased conflict of interest,” Neilson said.

Second, the share of CEOs with MBA degrees has increased to 28 per cent in 2013 from 19 per cent in 2003 – a rise of nearly 50 per cent over 10 years and a trend the study’s authors expect to continue.

Follow Emirates 24|7 on Google News.