Vice Chair, Board & CEO Services, Global Leader, CEO Succession Practice
A Changing of the CEO Guard?
A surprising number of CEOs will be on the beach this summer instead of the office, and it isn’t because of remote work—it’s because they’re leaving their jobs in record numbers.
According to the latest data, May marked the highest-ever monthly total of CEO exits, with 224 leaders leaving their positions, many of them involuntarily. Through the first five months of this year, CEO exits jumped 18% over 2022, with the highest-ever total for that time frame, too. And despite the improving economy, the trend isn’t likely to let up any time soon, say experts. “We are in a transitional time, and CEOs won’t be exempt,” says Jane Stevenson, global leader of the CEO Succession practice at Korn Ferry. She says the intensity of the business landscape and the taxing nature of the CEO role today is “creating a bit of a changing of the guard.”
The shift is in sharp contrast to pandemic and early post-pandemic times, when CEOs stayed on to steer their companies through the crisis and its aftermath. But experts say some may have stayed on too long.
After a three-year run navigating through one of the most difficult business environments ever, CEOs are “coming out the other side spent, and pulling the rip cord on their own careers,” says Torrey Foster, managing partner of Korn Ferry’s North American Consumer Markets practice. To be sure, boards cited retirement as the trigger for 182 CEO departures so far this year, an increase of 17% over the 155 retirements through May of last year.
Foster says one factor driving both voluntary and, to some degree, forced retirements is both the performance and perception of CEOs. On the performance side, most firm revenues were substantially down last year, and looked especially weak compared to 2021 results. “Even before you throw in inflation, bonuses and incentives were going to be down,” says Foster. Recent proxy filings for year-end 2022, in fact, show CEO compensation flat or in decline. On the perception side, Foster says, some CEOs have also made key missteps in reading political and social developments, or misread how far they could push staffers.
As for reasons given by boards, officially, the most common reason for the exits is no reason at all. In 266 instances, boards provided no official explanation for the CEO’s departure, up 89% from the 141 unexplained departures in 2022. For her part, Tanya van Biesen, managing partner of the Board and CEO Services practice in Canada for Korn Ferry, says she’s seen an uptick in confidential CEO searches in the market over the last few months. She explains the lack of transparency and secrecy as a way for boards to protect a current CEO’s reputation while also “taking advantage of this moment to pivot before the next wave of major transformational change hits.”
In the case of the tech industry, which leads the private sector in CEO exits, old fashioned overhiring and a return to financial rigor are driving departures. So far, 91 tech CEOs have left their positions this year, up 44% from the 63 CEOs that did so through May of 2022. Bradford Frank, senior client partner in the Global Technology practice at Korn Ferry, says many of those departures reflect the fact that boards are reassessing the need for more disciplined financial management. “Tech boards are leaning towards more operationally focused CEOs,” he says.
Stevenson says the current trend lines speak to the need for boards to double down on developing enterprise leaders—people who can run and change the business simultaneously—as part of their succession efforts. Korn Ferry research shows that only 14% of current leaders possess the skills and traits needed to carry out this dual mandate, however. “The level of engagement needed from leaders to manage performance and create change is at unparalleled heights,” says Stevenson.
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