North American Global 500 CEO Turnover Declines Markedly
NEW YORK, Jan. 23 /Xinhua-PRNewswire/ -- When it comes to the super class of CEOs in the world's largest companies, upheaval in the chief executive suite is not in the exclusive domain of one region, according to a new Global 500 CEO Departures(TM) in-depth analysis by public relations firm Weber Shandwick. Overall, a sizeable 15 percent of the world's largest companies experienced a chief executive change in 2006 (10 percent in North America, 18 percent in Europe and 16 percent in Asia Pacific). These findings are based on CEO departures at the world's 500 largest revenue-producing companies and show that disruption in the chief executive suite is clearly a worldwide phenomenon.
On a positive note, the proprietary analysis reveals that the overall departure rate of global 500 CEOs declined from 17 percent in 2005 to 15 percent in 2006 -- an 11 percent drop proportionally. On a regional basis, the world's largest companies headquartered in North America experienced the most marked decline, from 18 percent in 2005 down to 10 percent in 2006. In contrast, the world's largest company CEOs in Europe saw a modest rise (from 15 percent in 2005 to 18 percent in 2006) while Asia Pacific witnessed no change.
GLOBAL 500 CEO DEPARTURES
2006 Percentage of 2005 Percentage of
CEO 2006 CEO CEO 2005 CEO
Departures Departures Departures Departures
Within Region Within Region
# % # %
Total 74 15 83 17
North America 18 10 34 18
Europe 33 18 28 15
Asia Pacific 20 16 19 15
Latin America 3 * 2 *
Source: Weber Shandwick Global 500 CEO Departures(TM) Analysis
* Due to small sample sizes in Latin America, the percentages are not
shown.
Weber Shandwick President Andy Polansky says, "Considering that the world's leading 500 companies are responsible for generating approximately $19 trillion(1) in revenue, quality CEO succession planning, leadership training and board accountability have far-reaching consequences, not only for individual companies but also for members of the worldwide business community. Weber Shandwick has a great deal of experience helping companies navigate communications challenges in an environment that rewards transparency and outreach to key constituencies. These components are integral to good corporate governance and management practices."
The analysis revealed other significant shifts in the chief executive suite of the world's 500 largest companies:
-- Country CEO Turnover - The top five countries worldwide experiencing
the greatest CEO turnover in 2006 were the United States, Japan,
Britain, Germany and France. In 2005, the greatest CEO churn
worldwide occurred in the United States, Japan, France, Britain and
the Netherlands. In the past year, Germany jumped into the top five.
-- Reasons for CEO Departures - In 2006, over one-half (57 percent) of
global 500 CEOs retired or left office for reasons such as planned
succession, promotion to chairman, political appointment or a new
position at another company. Nearly one-third (31 percent) left
against their will and the remainder (12 percent) exited due to
mergers, illness, interim positions and corporate governance changes.
-- Insider vs. Outsider Turnover - In both 2006 and 2005, insider
executives continued to outnumber outsider executives among new CEOs
at the world's largest companies. In 2006, 65 percent of global CEOs
were chosen from inside the company versus 35 percent chosen from
outside. The proportion of insider to outsider executives has remained
stable year over year (67 percent and 33 percent in 2005).
-- Seasonal CEO Departures - In 2006, global CEOs left their positions in
fairly equal proportions each quarter. In 2005, more of the world's
largest company CEOs departed in the first two quarters versus the
last two quarters of the year.
GLOBAL 500 CEO DEPARTURES BY QUARTER
2006 2005
% %
First Quarter 23 31
Second Quarter 23 34
Third Quarter 26 17
Fourth Quarter 28 18
Source: Weber Shandwick Global 500 CEO Departures(TM) Analysis
"Despite the good news that overall CEO churn among the world's largest 500 companies appears to be slowing down, uncertainty from CEO change is felt from the boardroom to the mailroom. Whether CEO departures are due to standard succession planning, mergers, poor financial performance or wrongdoing, boards everywhere must fill the leadership pipeline with the best and the brightest for the challenging times ahead," said Weber Shandwick's Chief Reputation Strategist and CEO expert Dr. Leslie Gaines-Ross.
Global 500 CEO Departures(TM) Methodology
Weber Shandwick's Global Departures(TM) analysis is based on the world's largest companies by revenue according to Fortune magazine's Global 500 ranking (July 24, 2006 and July 25, 2005). Fortune calculates revenue using publicly available data based on the companies' fiscal year ending on or before March 31, 2006. Weber Shandwick divided the global market into four regions -- North America (U.S. and Canada), Europe, Asia Pacific and Latin America (including Mexico).
To track daily CEO turnover, Weber Shandwick used a variety of electronic search engines, such as Factiva, LexisNexis, The Corporate Library's Board Analyst and company Web sites. After a CEO departure was identified, Weber Shandwick confirmed the departure with the company's official press release.
Weber Shandwick also investigated the reasons for each CEO departure -- retirement, succession plan, promotion, political appointment, move to a new company, resignation, termination, conclusion of interim period, corporate governance change, merger or demerger, or illness. For each CEO departure, Weber Shandwick obtained information on the new CEO's name, title, insider/outsider status, date of announcement and start date. The firm also tracked the outgoing CEO's name, title, insider/outsider status, any continuation with the company and additional relevant information.
For purposes of the analysis:
-- Insider CEOs are defined as executives who have worked inside the
company for three or more years before being announced as the new
CEO.
-- Outsider CEOs are defined as executives who either have never worked
for the company or have been employed by the company for less than
three years before being announced CEO.
-- CEOs were defined as the company's highest-ranking executive. In some
countries, such as Japan, the president holds this position.
About Weber Shandwick
Weber Shandwick is one of the world's leading global public relations firms with offices in major media, business and government capitals around the world. The firm specializes in strategic marketing communications, media relations, public affairs, reputation and issues management, and offers corporate communications counseling services. Weber Shandwick also provides specialized integrated services including Web relations, advocacy advertising, market research and visual communications. In 2006, Weber Shandwick was named Large PR Firm of the Year (PR News U.S.), European Consultancy of the Year (The Holmes Report) and Network of the Year (Asia Pacific PR Awards). The firm also won the United Nations Grand Award for outstanding achievement in public relations. To learn more, please visit http://www.webershandwick.com.
Weber Shandwick is a unit of The Interpublic Group (NYSE: IPG), which is one of the world's leading organizations of advertising agencies and marketing services companies.
About reputationRx ( http://www.webershandwick.com/reputationRx )
Weber Shandwick's new reputationRx Web site provides professionals interested in leadership issues with the latest news, research findings, insights, best practices and commentary on how to build and safeguard CEO and corporate reputation. It covers a full range of topics such as reputation care and recovery, CEO turnover, corporate responsibility, and strategies for communicating CEO and corporate reputation. The site is also continually updated to include the most recent newsmakers and fast-breaking trends that are transforming the business and reputation landscapes.
(1) Fortune (July 24, 2006)
For more information, please contact:
Laura Bachrach
Weber Shandwick
Tel: +1-212-445-8467
Email: lbachrach@webershandwick.com
