Fewer CEO Exits in 2002, More Hires from "Inside"

January 2, 2003 (PLANSPONSOR.com) - Chief Executive Officer (CEO) departures in 2002 totaled 749, down 19% from the 929 last yea, according to outplacement firm Challenger, Gray & Christmas.

The 2002 figures represent a decline of 48% from the 1,106 CEO departures experienced in 2000.  Still,  the 64 CEO changes recorded in December were 28% more than the  50 departures tracked in November  and 10% more than the 58 in December 2001.  It was only the fourth time this year that the monthly total surpassed the year-ago figure.

Additionally, the fourth quarter was the second highest in terms of CEO turnover, with 187.  That was slightly higher than the  181 in the third quarter .  None of the quarterly figures in 2002 topped the figures recorded in the same quarters the previous year.

Out of the 749 CEO departures announced in 2002, 39%, 286 announcements, offered no explanation for the executive change.   December saw a similar trend, with 41% offering no explanation, 33% leaving on a resignation, 19% retiring, 3% accepting a position elsewhere and the remaining 4% no longer in the CEO position because of another internal position, stepping down or death.

The service sector saw the most turnover in 2002 with 125 departures.  It was followed closely by the troubled technology sector with 124.   In December, the service sector again topped the list, with 14 departures, followed by technology (11) and financial (7), with retail, food and health each recording six CEO departures.

CFO Placements

Chief Financial Officers (CFO) were even less likely than CEOs to leave or be asked to leave their positions.  Despite major accounting scandals in 2002, only 408 CFOs vacated their posts and some of these left in order to fill the CEO spot.  

The December figure of 24 departures was the second lowest of the year behind February’s 23, down from November’s 45.

However, the departures by industry were a close approximation of the CEO numbers.   The service industry saw the most CFO departures in December with 8, followed by technology (3) and financial, retail and consumer goods all recording 2 apiece in December.

December’s reasons for leaving were varied from the CEO numbers.   Twelve report a resignation, with six unspecified, four retiring and accepting a position elsewhere and being fired each representing one departure.

Corporate Stability?

Challenger said the decline seen this past yearmay indicate that boards of directors, in an effort to offset some of the uncertainty in the economy and the markets, chose to maintain some stability at the very top of the corporate ladder.

To support this assumption, Challenger pointed to the fact that 81% of the December CEO announcements detailing succession plans indicated that the replacement CEO is from within the company.

In addition to fewer CEO oustings, it may be that fewer chief executives are leaving voluntarily due to the limited number of available opportunities, according to Challenger.

The report points to 2000’s numbers when it was more common to see announcements saying that the CEO left to pursue other opportunities.   2002 saw more announcements offering no explanation, with an increased frequency in the number of CEOs resigning or retiring.