CEO Firings Drop to Lowest Level Since 2005

Less than 16% of CEO turnover was due to dismissal in 2014, says The Conference Board.
Matthew HellerApril 14, 2015

The improving U.S. economy may be having a positive effect on the job security of CEOs.

According to the 2015 edition of CEO Succession Practices, released Tuesday by The Conference Board, CEO firings last year declined to their lowest rate since 2005. Less than 16% of CEO turnover in 2014 was due to dismissal, down from 23.8% in 2013 and 29.4% in 2012.

“The lower dismissal rate [in 2014] is, at least in part, a function of the marked signals of improvement in the broader U.S. economy,” Matteo Tonello, managing director of corporate leadership at The Conference Board, said in a news release.

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“A softer rate was also foreseeable in light of the high turnover reported by S&P 500 companies in the last few years, when approximately one out of four departing CEOs was let go by the company board,” he added.

More stable economic conditions and improved corporate performance the last couple of years have also caused a rise in average CEO tenure, the Conference Board said. From only 7.2 years at the peak of the financial crisis in 2009, average tenure at large companies has rebounded to 9.9 years in 2014 — the longest since 2002.

Two long-tenured CEOs who departed in 2014 — Larry Ellison (37 years at Oracle) and Peter Rose (26 years at Expeditors International of Washington) — contributed to the 2014 results. Excluding those two CEOs, the average tenure was 9 years in 2014, in line with the average tenure of 8.7 years between 2001 and 2014.

The report also highlighted the effect of increasing board independence on the CEO position. Only 8% percent of CEO successions in 2014 involved immediate joint appointment of the incoming CEO as board chairman, down from 9.5% in 2013 and 18.8% in 2012. About one-third of departing CEOs remained as executive or non-executive board chairman for at least a brief transition period, typically until the next shareholder meeting.