Interim CEOs on the Rise and Underestimated

June 26, 2006
Contact
Laura Bachrach
Weber Shandwick
212-445-8467
lbachrach@webershandwick.com

NEW YORK, June 26, 2006 – A new class of CEOs – the Interim CEO – has been identified by global public relations firm Weber Shandwick. The number of Interim CEOs has grown markedly in recent years. Last year, there were nine Interim CEOs in place at major companies, a more than four-fold increase from 2003. Notably, more than two-thirds (69 percent) of the 13 identified publicly traded companies led by Interim CEOs since 2003 dramatically outperformed an index of peer companies by a median of 10.8 percent. Despite the perception that these CEOs are primarily transient caretakers, Weber Shandwick’s analysis reveals that these executives’ performances may be vastly underestimated.

“The trend in Interim CEO appointments is expected to continue,” said Micho Spring, chairperson of Weber Shandwick’s corporate practice. In 2006, several Interim CEOs have already taken the helm at high profile companies such as Gateway (Rick Snyder), Kelly Services (Carl Camden, now CEO), L-3 Communications (Michael Strianese), Radio Shack (Claire Babrowski), Wendy’s International (Kerrii Anderson) and Zale Corporation (Betsy Burton).

Other interesting findings on this newly emerging leadership group are:

• On average, an Interim CEO’s tenure was 159 days or 5.3 months, ranging from 59 to 300 days.
• During the service of the nine outperforming Interim CEOs, their company’s stock gained a median of 18 percent.
• In addition to the nine (69 percent) outperforming Interim CEOs, the stock of three (23 percent) Interim CEO-led companies underperformed an index of peer companies. The stock of the remaining Interim CEO-led company (8 percent) matched its peer index. [Returns were calculated from the last trading day before the Interim CEO started through the last trading day of his/her service as Interim CEO.]
• Among all Interim CEO-led companies examined over the past three years, the median company outperformed an index of peer companies by a significant 8.1 percent.

CEOs continue to depart at a rapid pace as corporate boards take more active roles in overseeing executive performance. As CEO tenures increasingly shorten and former CEOs depart unexpectedly, boards frequently find that successor CEOs are not identified or properly groomed for the chief executive position. Interim CEOs represent a smart solution until boards can find qualified successors or gain confidence in the Interim CEO’s leadership ability.

Dr. Leslie Gaines-Ross’ reputation blog can be found at http://www.reputationxchange.blogspot.com/