Don’t be fooled by CEO exits at Hewlett-Packard, General Motors and Sara Lee this month. Chief executive turnover has fallen to a five-year low and may not rise until the economic outlook clears and stock-option values rebound.
There were 709 CEO changes in 2010’s first half among publicly traded companies in the U.S., down from 871 a year earlier and 1,482 in the first six months of 2006, according to New York-based Liberum Research.
“Boards were looking at their CEO and saying: ‘You’re not going anywhere. We’re in trouble right now, and we need you to stick around and sort this out for us,’ ” said John Wood, chief of CEO and Board Practice at Chicago-based Heidrick Struggles International Inc.
“C-suite churn” sliding to levels not reached since at least 2005 shows how directors prefer to shake up top management in good times and stick with “the devil they know” during a recession, said Gail Meneley, a co-founder of search firm Shields Meneley Partners in Chicago.
“Boards adjust their expectations based on external factors just like they adjust based upon internal factors,” said Maggie Wilderotter, CEO of Frontier Communications Corp. and a Procter & Gamble Co. and Xerox Corp. director. “The economy is a big external factor.”
Directors’ desire for continuity shaped CEO Ed Whitacre’s decision to step aside as GM plans an initial public offering to cut the government’s 61 percent ownership stake.
GM’s board and bankers asked Whitacre, 68, to agree to leave now or stay for years more to ensure the success of the automaker’s IPO, three people with knowledge of the matter said.
A more-robust recovery is pivotal to CEO turnover climbing back to historical rates, Meneley said.
