- PwC’s 2018 ‘CEO Success study’ shows a number of important trends underway affecting top corporate leaders
In the executive suite of the world's largest listed companies, the length of time top corporate leaders can be expected to remain at the helm has fallen to a multi-year low, while the percentage being ousted for unethical conduct is at its highest since the turn of the millennium, according to a survey by PwC.
Among the world's 2,500 largest public companies, 17.5 per cent changed their chief executive last year, reflecting the highest turnover rate recorded since 2000, according to PwC's 2018 "CEO Success study".
The study also found that the average length of tenure is decreasing. In 2000, a CEO could expect to remain in office for eight or more years, while in the last decade, average CEO tenure was just five years.
The study defines long-serving CEOs as having been in the position for 10 years or more. North American CEOs were the most likely to be long serving, at around 30 per cent, while in Europe the figure was just 19 per cent. In Japan the long-serving rate is 9 per cent, while in China the figure is 7 per cent.
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Among regions, the CEO turnover rate in North American is trending down, from 17.9 per cent in 2000 to 14.7 per cent in 2018. The CEO turnover rate in western Europe was 10.2 per cent in 2000, but has climbed to 19.8 per cent in 2018.
In the United States long-serving CEOs were much more likely to also hold the position of chairman than in other regions, the study found.
CEO turnover was highest in communication services companies at 24.5 per cent, and lowest in the health care industry at just 11.6 per cent in 2018.
Last year just over two-thirds of CEO turnovers were planned successions, in line with trends over the past 18 years. About 20 per cent were forced departures and the remaining 11.4 per cent were the result of merger and acquisition activity.
But for the first time in the study's history, more CEOs were dismissed for ethical lapses than for financial underperformance or boardroom power struggles. About 39 per cent were ousted for ethical lapses during 2018, compared to 26 per cent in 2017. PwC defined ethical issues as including scandal or improper conduct, fraud, bribery, insider trading, environmental disaster, inflated resumes and sexual indiscretion.
The report also noted that long-serving CEOs generally outperform shorter serving CEOs on shareholder returns and were more likely to leave in a planned succession. However, successors to such CEOs are likely to significantly underperform and are much more likely to be forced from their roles.
Women accounted for 4.9 per cent of incoming CEOs in 2018, down from an all-time high of 6 per cent in 2017.
The utilities industry had the higher number of incoming female CEOs at 9.5 per cent
No women were elevated to the CEO position among leading industrial or information technology companies in 2018.
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