A Booz & Co study has shown that in 2011 the turnover rate among ASX 200 companies was 23.5%, which was an 80% increase from 2010 and significantly higher than the global average CEO turnover rate of 14.2%.
The three reasons identified for a CEO transition event were:
- Merger-based, in which a CEO’s job was eliminated after an acquisition (37% of the 2011 turnover events)
- Regular transition, which included planned retirements, the CEO’s acceptance of a position elsewhere, health-related departures or death in office (42%); and
- Performance-related, which included any departure initiated by the board, attributed by the media to poor financial or management performance, or where there was a demonstrable underperformance but the departure was described as being for ‘personal reasons’ (20%).
The Australian turnover rate was the highest since the Booz & Co study was first conducted in 2000, and represented an increase of 80% on the number of turnover events from 2010. The number of M&A-related successions increased from 5 in 2010 to 22 in 2011.
The Australian turnover rate of 23.5% compares with 14% in North America, 14% in Western Europe, 17% in Japan, 22% in Brazil, Russia and India and 7% in China.
When comparing the performance of departing Australian CEOs over the past 10 years, the study found that those recruited from outside the company delivered an average annual shareholder return of 11% compared to 8% for CEOs appointed from inside the company. During the economic downturns of 2000 and 2008, insiders performed substantially better than outsiders. Globally, insider CEOs tended to out-perform outsider CEOs.
The study is available on the Booz & Co website HERE.© Guerdon Associates 2021 Back to all articles