Governance News from Manifest - ISSN 1745 - 1132

Boards of the world’s 2,500 largest companies have become quicker than ever to oust underperforming chief executives (CEOs), with 2006 seeing nearly one in three leaving office involuntarily, a report from management consulting firm Booz Allen Hamilton has found.

The analysis discovered that from 1995 to 2006 annual CEO turnover has increased by 59%. Furthermore, Booz Allen reported, during that same period performance-related turnover grew by 318%.

However, Booz Allen suggested CEO departures have now levelled off, with every region of the world seeing turnover drop slightly below its peak of the past few years.

Furthermore, companies are globally taking up UK-style best practice by increasingly splitting the roles of chairman and CEO, and recruiting chairmen who have not previously served as the company’s CEO. Booz Allen’s report confirmed the advantages of this: in 2006, all underperforming CEOs in North America with long tenures either held the additional title of chairman or served under a chairman who was formerly CEO.

Steven Wheeler, Booz Allen senior vice president, said this study clearly shows the age of the imperial CEO has come to an end: “Welcome to the era of the inclusive CEO, who embraces and reflects the concerns of board members, investors and other constituencies”.

June 2007