Rate of CEO turnover surges in harder times
By Tiffany Hsu
Los Angeles Times
The roiling economy appears to be ripping into the ranks of upper management, pushing the chief executive turnover rate in a popular survey to an all-time high.
So far this year, 1,132 CEOs have left their posts, according to employment consulting firm Challenger, Gray & Christmas Inc. That's the highest nine-month total since the company began keeping track in 1999, and makes it likely that 2008 will eclipse the record 1,478 seen in 2006.
The tally of departed CEOs includes those who have retired, left for better jobs or otherwise resigned on their own accord. But Challenger's own chief executive says the rise in the turnover rate probably reflects increasing pressure on corporate leaders from their boards and shareholders.
"When in a difficult economic time, more companies report poor results and shareholders are upset," said John A. Challenger. "Sometimes, the CEOs have actually mismanaged, sometimes they're scapegoated. Either way, they're more vulnerable."
The Challenger survey is based on public announcements and includes top executives of both private companies as well as public companies.
Among the prominent CEOs who stepped down this year were Angelo R. Mozilo of Countrywide Financial Corp., Meg Whitman of eBay Inc. and Philip J. Schoon-over of Circuit City Stores Inc.
Richard Koppes, a corporate governance attorney with Jones Day in San Francisco, said the high salaries paid to many chief executives can be a liability.
"There's a lot of anger at executive compensation that is causing boards to say, 'We're paying you well, so you'd better perform,' " he said.
The digital information age is also contributing to CEO turnover, said Leslie Gaines-Ross of public relations company Weber Shandwick, which issued a study on the executive departures earlier in 2008.
"These are much harder times because of the Internet, where more information and leaks and chatter from former employees and others create more chances for the CEO to be compromised," she said. "It's the nature of the CEO job to have a short shelf life, and anyone going into it knows that."