CEO Turnover
06/12/2005
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If CEOs are not going to stay around, what performance aspects are they likely to focus on?  To an extent it may depend on how long they stay.

The annualised turnover rate for CEOs is 21.9%.  That is, based on 196 companies reporting data for 2 years in AASB 1046 format, only 153 had the same CEO at the end of both financial years.  CEO tenure is just over four and a half years. 

Assuming the LTI plan is for 3 year performance, the average CEO will effectively realise only 1 vested LTI payment versus probably 4 STI payments during their tenure.  To shore up their financial future for retirement, it could be argued that the average CEO would be tempted to concentrate on short term results, rather than sustainable long term earnings growth.  Boards would be well advised to have their advisers look more closely at this conundrum.

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