Dan Ackman, Forbes.com
NEW YORK - The corner office is an increasingly tenuous
perch, according to a new study, with about 10% of the
CEOs of publicly traded companies leaving office in
2002. But fewer than one in 25 CEOs left involuntarily--and
it's likely that the falls from grace were often cushioned
by lovely parting gifts in the form of severance packages,
though the study is silent on that point.
Involuntary successions in 2002 increased
by more than 70% over 2001, the study of 2,500 public
companies around the world conducted by the consulting
firm Booz Allen Hamilton indicates. Meanhile, the total
number of CEO changes only increased by 10%. In 2001,
however, fewer than 60 CEOs were forced out of the 2,500
companies. In general, there are relatively few workers
with CEO in their title, and the number who got fired,
even in 2002, is smaller still. So it's hard to make
conclusions from the statistics.
Still, Booz Allen is jumping in. "Business
leaders are enduring scrutiny and pressure unseen since
the Great Depression," said Charles Lucier, senior
vice president emeritus of Booz Allen Hamilton, in a
statement. "The CEO mystique has all but evaporated,
and director activism has replaced crony capitalism
in the boardroom."
The study concludes that CEO firings are
at a "record high." But Booz Allen started
its research in 1995, so the record is only since then.
Most of the years studied were banner years for business,
so it's to be expected that CEO turnover would be low,
even if it's not at all clear that the lows were historic.
It's also not clear how hard the fall generally is.
Top executives who departed in 2001 and 2002 received
an average golden parachute of $16.5 million just in
cash, plus perks and benefits, according to a recent
study by The Corporate Library, which monitors corporate
governance issues. If you must be fired, that's the
way to do it.
The Booz Allen study indicates that, regionally,
the biggest change occurred in the Asia/Pacific region,
which accounted for 19% of "global succession events,"
compared with 8% in 2001 and 6% in 2000. Forced turnover
in Asia accounted for 45% of all transitions there,
up from only 6% in 2001. Of course, when you start with
a tiny number, any increase looks big. In Asia in 2002,
the study--extrapolating from percentages--indicates
48 CEO departures. In 2001, there were just 18--for
an entire continent.
North America accounted for 48% of all
successions--or about 121. In Europe, there were about
71 CEO successions in 2002. The overall rate of CEO
firings was 3.7%, up slightly from 2001. The rate of
CEO change there has increased in each of the five years
the study examined since 1995, Booz Allen said in a
statement, though it was not clear by how much.
A handful of the CEO departures were highly
publicized, such as those at Enron (otc: ENRNQ - news
- people ), WorldCom (soon to be known as MCI), McDonalds
(nyse: MCD - news - people ), AOL Time Warner (nyse:
AOL - news - people ), Tyco International (nyse: TYC
- news - people ), Kmart (now Kmart Holding (otc: KMRTV
- news - people )) and Dynegy (nyse: DYN - news - people
). Some resulted from scandal; others from poor financial
performance.
The total separation rate for CEOs does
exceed that for other workers. In the U.S., for instance,
the total turnover rate was 3.1% in May 2002, according
to the U.S. Bureau of Labor Statistics. That number
tends to decline in bad economic times as workers are
less likely to quit, even if more are being laid off.
For CEOs, the situation should in theory
be the opposite, with more being fired when their companies
don't perform. But while Booz Allen's comments indicate
that boards of directors have lost patience, that's
not necessarily the case. It could be that they have
the same amount of patience they've always had, but
it's being tested more severely.
Reprinted from Forbes.com.
|
