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The rate of CEO turnover has reached a startling high this year, according to Challenger, Gray & Christmas, a global outplacement and business and executive coaching firm. According to its latest monthly turnover report, 1,009 chief executives had stepped down by the end of August this year, up from 879 a year ago, and more even than in the previous record year, 2008, in the depths of the recession.
In the midst of the longest stretch of economic expansion in American history, this development is unexpected. “Corporate boards are expecting big performance,” says Challenger, Gray & Christmas vice president Andy Challenger. “Slow, steady growth doesn’t seem to be satisfactory to a lot of these boards.” Also, CEOs are facing ever higher standards for how they conduct themselves in their personal lives, he notes. Boards are holding them responsible in ways that weren’t seen a decade ago.
In August, there were 159 CEO changes at U.S.-based companies, the highest monthly total on record, according to the report, and 28% higher than the 124 in July. In 2008, 992 CEOs announced their exits through August, 2% fewer than the current year-to-date total. Challenger tracks CEO changes at companies that have been in business for at least two years and have at least 10 employees.
In the past few weeks alone, several high-profile CEOS have resigned amid controversy and scandal. WeWork’s CEO Adam Neumann was forced to step down following reports of questionable behavior. The CEO of electronic cigarette company Juul, Kevin Burns, relinquished his position amid growing public concern about vaping-related deaths. Burns was succeeded by K.C. Crosthwaite, who was previously chief growth officer at tobacco company Altria. Other CEO departures include eBay’s Devin Wenig and Nissan’s CEO Hiroto Saikawa. There have also been some new CEO appointments, such as Wells Fargo’s announcement last week that Charles W. Scharf will be its new chief effective October 21. Former CEO Timothy Sloan stepped down in the spring.
There are many reasons CEOs are departing in such numbers, Challenger says. “It’s multifaceted.” He cites the slowdown in the economy and also the very long tenure of many CEOs during the longest expansion in American history. Many are simply ready for retirement. “There’s a proportion of the CEOs who are leaving because this is a good time to get out on top, put into place a succession plan and be able to submit your legacy,” he says. Also, boards are reevaluating CEOs at companies that aren’t performing optimally.
At some startups, like WeWork, founders haven’t been “able to navigate the different environments they’re moving into as the companies mature,” Challenger says. According to the report, 38% of the CEOs who stepped down through August took other positions at their companies. An additional 267 retired, 93 assumed new positions at other companies, and 20 left because of acquisitions or mergers. CEO exits have been highest in the government/nonprofit sector, with 218, followed by technology, with 134.
“Another part of the trend is that in the 10-year expansion, a lot of young companies have had the opportunity to implement new technologies, and automation,” Challenger says, and that is causing “legacy organizations” to look for fresh faces to implement new strategies.
