CEO attrition rate hits record-high of 17.5% in 2018

A report by strategy and consulting company, PwC has revealed that the CEO turnover at the world’s 2,500 largest companies soared to 17.5 percent in 2018 — 3 percentage points higher than the 14.5 percent in 2017.

The prime explanations for the exits were cited as planned, forced, and M&A-related (of which forced exits comprised 20 percent of all attrition). However, the reasons that CEOs were fired were different.

For the year 2018, the first time in the study’s history, more CEOs were dismissed for ethical lapses than for financial performance or board struggles.

Dismissals for ethical lapses included exit due to scandal or improper conduct; examples include fraud, bribery, insider trading, environmental disasters, inflated resumes, and sexual indiscretions.

CEO turnover rose notably in every region in 2018 except China, and was quite high in Brazil, Russia, and India (21.6 percent) while the lowest was in North America (14.7 percent).

Among industries, turnover was highest in communication services companies (24.5 percent), followed by materials (22.3 percent), and energy (19.7 percent), while healthcare saw the lowest CEO turnover (11.6 percent).

Reflecting on the diversity, the share of incoming women CEOs was 4.9 percent in 2018, down slightly from the all-time high of 6% in 2017, but it continues an upward trend from the low point of one percent in 2008.

The largest share of women CEOs in 2018 resulted from sharp increases in Brazil, Russia, India, China.

Among industries, utilities had the largest share of incoming women CEOs (9.5 percent), followed by communications services (7.5 percent) and financials (7.4 percent).

The study also reveals that successors to long-serving CEOs, however, face a difficult path. Successors turn in significantly worse financial performance, generally have shorter tenures, and are much more likely to be forced out rather than to depart via a planned succession.

Long-serving CEOs (tenures of more than 10 years) are most common at North American companies – 30 percent of the CEOs in North America were long-serving, compared with 10 percent for Brazil, Russia, and India, 9% for Japan, and only 7 percent in China.

Among industries, CEOs in healthcare were the most likely to be long-serving (28 percent), followed by those in IT (26 percent).

The median tenure of a long-serving CEO is 13.9 years, compared with 4 years for other CEOs which are more than three times as long. One likely reason for these longer tenures is that 46 percent of long-serving CEOs hold joint CEO and board chair titles by the time they leave.