CEO Revolving Door Keeps Spinning

May 18, 2006 ( - The revolving doors in C-Suites were spinning at a record pace in 2005 as CEO turnover reached record heights.

Consulting firm Booz Allen Hamilton said its survey of 2,500 of the world’s largest public companies revealed that 15.3% of chief executives left office in 2005, 4.1% more than in 2004, and 70% above the 9% global CEO turnover rate in 1995, according to a Reuters report.

The consulting firm attributed the increasingly hasty exits to increased responsiveness by directors to shareholder corporate governance issues and stepped-up regulatory pressure translating into more rigorous CEO performance plans.

According to the study, if the current pace continues, one in seven CEOs will be out of their jobs next year.

Geographically, in North America, CEO turnover rose to 16.2%, its highest level since 2000. Boards in the region were also more likely to force out a CEO than boards elsewhere, with 35% of departing CEOs forced out at North American companies – a new record for performance-related turnover.

Meanwhile, M&A accounted for much of the CEO turnover in 2005, as one in six left due to merger or acquisition, the most since 2000, according to the news report. .

The survey showed untested CEOs performed slightly better than seasoned CEOs, and that those from an outside company often produced returns four times better than those of insiders for their first two years in office.