Academic researchers who need to analyze large datasets at relatively low costs can use exechange’s Simplified Push-out Algorithm™ to classify CEO turnover as forced or voluntary.
The Simplified Push-out Algorithm is easy to handle and leads to robust results.
The license is free of charge for academic purposes. We ask you to properly attribute the ownership of the trademark as follows: “Simplified Push-out Algorithm is a trademark of exechange.”
According to the Simplified Push-out Algorithm, the classification is based on the following decision process:
- Mandatory retirement, death or poor health. A turnover is not classified if the executive has reached the mandatory retirement age or if the reason is death or poor health.
- Overtly forced departure. A turnover is classified as forced if the executive is openly pushed out (e.g., “terminated for cause”) or if there is no reasonable doubt that the executive leaves the position due to pressure (e.g., bad behavior).
- Reportedly forced departure. For the remaining cases, a turnover is classified as forced if the company or the press report information about pressure exerted on the executive to leave the position.
- Career rise. For the remaining cases, a turnover is classified as voluntary if the departing executive takes a comparable or superior position within the firm or elsewhere within three months.
- Compelling reasons. For the remaining cases, a turnover is classified as voluntary if the company or the press reports convincingly explain that the departure is due to personal or business reasons that are unrelated to the firm’s activities.
- Demotion. For the remaining cases, a turnover is classified as forced if the departing executive takes an inferior position within the firm or elsewhere within three months.
For the remaining cases, the succession is classified as forced if at least four of the following seven criteria are fulfilled:
- Low age. The age is under 60.
- Short notice. The announcement comes less than two months prior to the departure.
- Short tenure. The tenure in the position (time between start date and termination date) is under three years.
- Poor share price performance. The share price performance is poor, compared to the relevant benchmark.
- Non-transparent reason. The reason for the departure is not given, not understandable or not transparent (e.g., “to pursue other interests”).
- Critical time. The company reported bad news within three months prior to the departure announcement (e.g., weaker-than-expected results) or the company is in a critical situation.
- Succession issues. A permanent successor is not immediately available, the successor is taken from the board, the successor is brought in from outside or the position is eliminated.
All turnovers not flagged as forced or voluntary through the steps described above are classified as voluntary.
Depending on the specific character of the research project, the criteria can be varied.