Why are the C.E.O's leaving?

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And, this is only a partial list of the companies who have replaced their chief executives this year.

More than 1,000 chief executives of large U.S. companies have parted ways with their employers in the first nine months of this year, or 53 percent more than left all of 2004.

In the month of September, there were 121 CEO departures, compared to 58 a year ago, 59 two years ago and 64 three years ago.

"The surge is CEO departures this year is somewhat surprising, since the economy and corporate earnings have been improving," says John Challenger, chief executive of the outplacement firm Challenger, Gray & Christmas, which compiled the statistics. "That should theoretically make chief executives less vulnerable to profit-hungry boards and shareholders."

Funny, though, that the turnover in CEOs is counterintuitive.

Many times companies deal with poor economic times by hoping that steady management will help pull them through. Even with the performance of a particular chief executive is questionable, companies may keep them because they fear they may spiral even farther downward if clients or customers lose confidence in the company.

And, certainly when a number of companies change chief executives in good times, it opens up opportunities for movement of CEOs from one company to the next.

Then, of course, some CEO departures in recent months may be linked to Sarbanes-Oxley, the cumbersome financial accountability law that is costly, challenging and threatening to some executives.

Challenger says many chief executives are simply leaving of their own accord, perhaps settling for a lifestyle change. The average age of departing CEOs in September was 56.1 years.

"Many CEOs are simply deciding that it is time to let someone else take the helm," Challenger says. "Indicative of these congenial departures is that more CEOs are staying with the company in some capacity, such as a board member or special adviser."

Challenger reports that 57 percent of chief executives leaving their posts in September was due to retirement or resignation.

There is no evidence that chief executives of the future will enjoy any more security than today's. Shareholders are increasingly impatient with lackluster financial results, rapidly changing markets make it more difficult for executives to develop long-term strategies, and Wall Street continues to pressure companies for quarter-to-quarter earnings increases.

And then there are the chief executives, who wonder if making high-stakes salaries are worth the added stress.

A report earlier this year by the consulting firm Booz Allen Hamilton found a 14.2 percent turnover rate for the CEOs at the world's 2,500 largest public corporations in 2004, up from 9.8 the year before.

Booz Allen also identified that European companies are being faster on the trigger finger when it comes to changing CEOs. The average tenure of CEOs at European companies was 2.5 years when they left, compared to 5.2 years in the U.S.

By Challenger's count, when 2005 finally ends, U.S. companies will have replaced more chief executives than they have for many years, maybe more than ever.

Clearly, you can't blame a sour economy or any other one thing. It's just part of an evolution of how companies and the executives who run them look at the role of the CEO.


© Copley News Service

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Financial Accountability Law      Ceo Departures      Outplacement Firm Challenger     

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