Global CEO Turnover Rises 10 Percent In Past 12 Months According To New Weber Shandwick Study

Monday, March 03, 2008

NEW YORK, March 3, 2008 – CEO departures at the world’s 500 largest revenue-producing companies jumped 10 percent from 2006 to 2007, according to global public relations firm Weber Shandwick’s ongoing CEO Departures™ analysis. The CEO departure rate is returning to 2005 levels.

“Given stagnant markets, fierce competition and a complex business environment, it is not surprising that CEO turnover has risen sharply,” says Weber Shandwick’s Chief Reputation Strategist Dr. Leslie Gaines-Ross. “Although many CEOs leave for ordinary reasons such as retirement and succession planning, an increasing number also leave involuntarily. Just as CEOs receive most of the credit when things go right, they are expected to accept the majority of the blame when things go wrong.”

Source: Weber Shandwick’s CEO Departures™
*Due to very small sample sizes in Latin America, the percentages are not shown.

Regional CEO Turnover Highest in Asia Pacific and Trending Up
Proportionally, Asia Pacific companies experienced the highest turnover in 2007 compared to other regions, losing over one in five of their largest company chief executives. CEO turnover within Asia Pacific’s most elite companies also climbed 25 percent from 2006 to 2007. This increase is partially due to unusually high

turnover in Australia, which lost four CEOs in 2007, compared to none in 2006. However, Asia Pacific CEO turnover is primarily due to retirement and normal succession planning.

North American CEO departures increased a large 50 percent from 2006 to 2007, although failed to reach its 2005 high. This is attributable not only to a 33 percent increase in U.S. turnover, but also the retirement of three Canadian chief executives, up from zero in 2006.

In contrast to its regional counterparts, CEO turnover among Europe’s largest global companies decreased 15 percent from its peak in 2006. This reduced departure rate augurs well for the region.

“As CEO turnover rates among the world’s largest companies continue to shift year by year and region by region, straightforward leadership communications to all stakeholders rises in importance,” said Weber Shandwick President Andy Polansky. “In today’s uncertain economic environment when information and news are at a premium, CEOs would be wise to actively over communicate and regularly meet employees and customers face-to-face.”

Q1 and Q4 CEO Woes
The first and fourth quarters of 2007 appear to be the most difficult for vulnerable chief executives. Whereas CEO departures in Europe and Asia Pacific peaked in the first quarter of 2007, the fourth quarter was particularly tumultuous for North American chief executives, with 13 CEOs vacating office. North American CEOs in the financial and telecommunications sectors experienced the greatest turnovers.

Source: Weber Shandwick’s CEO Departures™
*Due to very small sample sizes in Latin America, the percentages are not shown.

Trends in the Corner Suite
Weber Shandwick’s analysis identified several other significant changes in the global chief executive suite:

• More CEOs Exited for “Non-Traditional” Reasons – Over the past three years, the world’s largest company CEOs continued leaving office primarily due to “traditional” reasons such as retirement, succession planning, or reaching the mandatory age for retirement. Since CEO departures for traditional reasons declined a large 22 percent from 2006 to 2007, it is possible that broader factors could be impacting CEO tenure worldwide. The past 12 months saw an increase in non-traditional reasons for CEO departures such as mergers, private equity buyouts, interim term completions, and corporate governance restructuring. In addition, there was a slight rise in CEOs departing against their will in 2007 over the previous year (28 percent, 2006 vs. 32 percent, 2007).

Source: Weber Shandwick’s CEO Departures™

• North American CEOs Most Likely to Be Ousted in 2007– Among CEOs of the world’s largest companies that left against their will in 2007, North American CEOs departed at the highest rate compared to their regional counterparts (37 percent, North America vs. 32 percent, Europe vs. 24 percent, Asia Pacific). This sizeable ouster rate is a dramatic change from 2006 where North American CEOs benefitted from having the lowest regional involuntary turnover rate. “CEOs in North America, particularly in the financial industry, are clearly back in the hot seat,” said Gaines-Ross. In stark contrast, European CEOs’ involuntary turnover rate remained fairly consistent over time and Asia Pacific’s involuntary turnover rate declined dramatically from 2006 to 2007.

Source: Weber Shandwick’s CEO Departures™

• Insider CEOs Still Preferred Over Outsider CEOs – Board preference for insider over outsider CEO replacements continues essentially unchanged year over year. In 2007, nearly seven out of 10 newly named CEOs were insider executives.

Source: Weber Shandwick’s CEO Departures™

• North American CEO Tenure On the Decline – The average tenure of global chief executives who exited office in 2007 was six years, down from 6 years, five months in 2006. North American CEOs’ average tenure dramatically shortened in 2007, dropping nearly two years from 2006 (8 years, 6 months in 2006 down to 6 years, 8 months in 2007). In contrast, the average duration of Asia Pacific CEO terms lengthened from 4 years, 3 months in 2006 up to 5 years, 7 months in 2007. European CEO tenure has remained relatively stable year over year.

Source: Weber Shandwick’s CEO Departures™

About CEO Departures™
Weber Shandwick’s CEO Departures study is based on an analysis of the global Fortune 500 companies. For purposes of the study:

• Insider CEOs are defined as executives who have worked for 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 been employed by the company for less than three years before being announced as the new CEO.

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 management, and crisis and issues management. It also offers corporate communications counseling services. The firm provides specialized integrated services including Web relations, advocacy advertising, market research and visual communications. Weber Shandwick received the highest client-satisfaction honors in the 2007 Agency Excellence Survey by PRWeek U.S. and in 2006, 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 2005, 2006 and 2007 United Nations Grand Award for Outstanding Achievement in Public Relations. To learn more, please visit 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.