A challenging corporate world

A challenging corporate world

The life of a CEO at a large company can turn out to be expendable.

We all aspire to a life at the very top, but only a few can teach us about the sacrifices and everything that’s put at risk, especially in the challenging corporate world that continuously evolves around us.

PwC’s Strategy& CEO Success study analyzed the harsh and competitive year that was 2018 for chief executives, showing that nearly 17.5% of the CEOs of the world’s largest 2,500 companies left their posts — representing the highest rate of departures of the PwC index that is produced every year.

CEO turnover in 2018 was high, even matching the overall rate of forced turnovers with recent trends, at 20%, but what has truly changed are the reasons of the executives’ departure. For example, for the first time in the PwC Strategy& CEO Success study, more CEOs were dismissed for ethical lapses* and more aggressive misconducts than for financial performance or board struggles, even with intervention by regulatory and law enforcement authorities including sexual harassment.

*(Defining dismissals for ethical lapses as the removal of the CEO as the result of a scandal or improper conduct by the CEO or other employees; examples include fraud, bribery, insider trading, environmental disasters, inflated resumes, and sexual indiscretions.)

When it comes to every region worldwide, CEO turnover rose notably in every region in 2018 except China, and included a large increase in Western Europe. Turnover was highest in “other mature” economies (such as Australia, Chile, and Poland), at 21.9%, and nearly as high in Brazil, Russia, and India (21.6%). The next-highest turnover numbers were in Western Europe (19.8%), and the lowest were in North America (14.7%). Among industries, CEO turnover reported highest in communication services companies, at 24.5%, followed by materials (22.3%) and energy (19.7%). Healthcare saw the lowest rate of CEO turnover during 2018, with a 11.6 percentage.

In 2000, an executive leader could hope to maintain himself in office for eight to ten years, but over the last decade, and even more so now, an average CEO tenure has been of only five years, making the life of a CEO nasty, brutish, short and even ungrateful, turning into revenue loss or even company disaster. For example, in 2017, when Jeffrey Immelt departed from General Electric after a 17-year run, his successor, longtime GE executive John Flannery, stepped up and launched a major transformation for the troubled conglomerate, however, his plan quickly fell apart and delivered disappointing financial results; 14 months into Flannery’s tenure, he was dismissed by the board and replaced by Larry Culp, the former chief executive of Danaher, turning him into the first outsider recruited as CEO in 126 years.

The global median tenure for all CEOs has remained steady at five years for the last decade, and the 53-year median age of incoming CEOs has also been steady over the last decade.

Long-serving CEOs

Long-serving CEOs are most common at North American companies by a significant margin.

Over the full period, 30% of the CEOs in North America were long-serving, compared with 19% for Europe, 10% for the BRI countries (Brazil, Russia, and India), 9% for Japan, and only 7% in China.

In fact, over the last 15 years, CEOs in North America were 122% more likely to be long-serving than CEOs in the rest of the world.

Among industries, CEOs in healthcare were the most likely to be long-serving (28% probability), followed by those in information technology (26%). The index also found few other proportionality differences among long-serving CEOs by industry.

From 2004 to 2018, 82% of long-serving CEOs left office in a planned succession. Over the last three years, the number has risen to 85%, compared with 76% for other CEOs. The number of departures resulting from an M&A transaction is almost the same for long-serving CEOs and other CEOs.

Women in the corner office

2018 showed little to no evolution regarding women occupations in CEO positions.

The share of incoming women CEOs was 4.9% in 2018, slightly down from the all-time high of 6% in 2017, but it continues an upward trend from the low point of 1% in 2008. Unlike in 2017, when the record high was driven by a 9.1% spike in incoming women CEOs in the U.S. and Canada, the largest share of women CEOs in 2018 resulted from sharp increases in Brazil, Russia, India, China, and “other emerging” countries.

Among industries, utilities had the largest share of incoming women CEOs (9.5%), followed by communications services (7.5%) and financials (7.4%).

The lowest share? No women became CEOs of industrials or information technology companies in 2018.

Click on the story below to see how women are having in tougher in the corporate (and working) world.


About the Author:

Pablo Hernandez
Community Manager and Senior Reporter for CEO Magazine. Write to Pablo at pablo.hernandez@ceo-latam.com
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