By Jo Whitehead *
(exechange) — July 1, 2021 — exechange does a great job of highlighting the reasons for CEO departures. How much should investors (and CEOs) be worried that a CEO will be so unfit for the job that the board has to force them out?
The data suggests that the answer is, a lot (1). The extent to which a CEO is “forced out” is a spectrum from “left under a cloud” to “clearly fired.” exechange’s data suggests that over 50% left under a cloud, or worse.
An annual survey by Strategy&, PwC’s strategy consulting business, found that 28% were forced out, but is likely to be an underestimate because some apparently planned departures would have been somewhat forced; some less than perfect CEOs may eke out a final year or two because the costs of an earlier transition are too high.
A third source is the Conference Board’s 2019 Succession Practices report, which estimates that 23% of S&P500 CEOs were fired for poor financial performance, but this excludes those who were fired for other reasons, such as unethical behavior.
Overall, my judgment is that a third of CEOs are forced out.
(1) Whitehead, J. (2021). Is “Bad Leadership” a Problem Worth Addressing? In Örtenblad Anders (Ed.), Debating bad leadership: reasons and remedies (pp. 35–46). essay, Palgrave Macmillan.
* The writer is a director of the Ashridge Strategic Management Centre at Hult International Business School and is currently researching why companies and CEOs stumble. Jo.firstname.lastname@example.org
Editor’s note: This is a guest post.