Fortnightly's Field Guide to CEOs
They just don't make 'em like they used to. CEOs, that is. Where once CEOs could count on at least a decade of chauffeur-driven limos, stock options, and seven-figure bonuses, in today's hostile habitat, CEOs have a shrinking lifespan. That is the conclusion of a Booz Allen Hamilton (BAH) study on CEO turnover.
In just the last six years, the worldwide mean tenure of all CEOs has dropped two years, from 9.5 in 1995 to 7.3 in 2001. And they're getting younger, too: the average age of North American CEOs was 50.4 in 1995; last year it was 48.8.
BAH divided CEO succession events into three categories: merger-driven, performance-related, and regular transition. For those CEOs that departed due to performance reasons, it was mostly due to the law of the jungle: Even if their performance was strong in the first half of their tenure, when they stopped coming back from the hunt with higher stock prices, they were pushed aside.
One slightly positive note: BAH's "CEO Safety Index" puts the energy industry* near the top of the CEO stability charts. But don't take too much comfort, because the data in the study is from CEOs departing in 2001-before the tidal wave of change the industry saw in 2002.
Don't expect the trend toward higher CEO churn rates to reverse. If anything, the BAH study predicts that boards will be terminating CEOs in under-performing companies more and more quickly.
But enough of dry statistics. Use our handy guide to divine your CEO's future.
Thoroughbreds: Win some races for a few years and then are put out to pasture-if they're lucky, as part of a "stud" package, with lots of consulting fees. Can live for another 15 to 25 years after they retire from racing. Lions: They have a 15- to 18-year life span, often acquire their pride through hostile take-over, and keep it until they are dethroned by another upstart, who quickly kills all the cubs of the former king. Jackals: Trying to shed their reputation as cold-hearted and calculating, these CEOs point to their adherence to the bottom line: survival. Hard to say how long they'll last in the drought-stricken capital climate-at most, 12 years. Wolves: With their keen instincts and excellent vision, they work their way up the ranks to be the CEO of the pack, and thrive during harsh conditions that weaken their competitors. Even so, they last about eight years. CEO: Formerly lifetime emperors of their domain, CEOs are getting hired younger, and fired younger. While breakthroughs in medicine are extending human life spans, breakthroughs in accounting are shortening the CEO life span. It's down to seven years, and likely to shrink more.
*We differ slightly on our terminology with the folks at BAH. We use "energy industry" to refer to the industry that generates and supplies electricity and gas to end users. BAH uses "energy industry" to refer to oil and gas producers and refiners, and pipeline owners/operators, and "utilities" to mean electric and gas utilities, regulated or not. See "Why CEOs Fall: The Causes and Consequences of Turnover at the Top," strategy+business, Third Quarter, 2002.
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