Each year, Spencer Stuart tracks CEO transitions among S&P 500 companies. These transitions can be part of a planned succession or can arise unexpectedly, the result of company performance or personal issues. In addition to cataloging the reasons for CEO departures, based on company reporting, we also examine information about the successors, including whether or not they are internal candidates and whether they have been appointed chairman of the board in addition to CEO.
Our 2017 analysis revealed a small uptick in the number of CEO transitions among S&P 500 companies. In addition, we saw a significant decline in the number of internally promoted CEOs. Sixty-nine percent of the new CEOs were promoted from within the company, compared with 90% in 2016 and 84% in 2015.
CEO transition overview
Fifty-nine S&P 500 companies installed a new chief executive in 2017, the highest number of transitions in the last 10 years. Since 2007, when 58 companies named new CEOs, the number of transitions generally declined before hitting a low of 37 in 2012.
S&P 500 CEO Transitions 2007 – 2017 (% agreeing)
The largest S&P 500 companies — the top 200 by revenue — were most likely to experience a CEO transition in 2017. Nearly 30% of companies ranked 101 to 200 in revenue and 20% of the top 100 companies named a new CEO in 2017.
Percentage of Transitions by S&P 500 Company Range
Why do CEOs leave?
The vast majority — 73% — of CEO transitions were attributed in company reports to the former CEO’s decision to retire or step down. This represents a decrease from 2016, when 88% of transitions were driven by CEOs retiring or stepping down. In 2017, 8% of CEOs left for health reasons and 15% resigned under pressure, versus 9% in 2016.
Reasons for CEO Transitions
The average age of incoming CEOs is 54, just one year older than the average in 2016 (53). The average age of the outgoing CEOs is 60.
Seven of the new CEOs, 12%, are women, compared with four (7%) in 2016.
External vs. internal candidates
Sixty-nine percent (41) of the new CEOs were promoted from within the company, the lowest rate in a decade. In 2016, 90% of new CEOs were internal successors. All but nine of the internal CEO promotions resulted from a planned succession.
CEO Successors: Internal vs. External Placements
We further break down new CEO backgrounds into five categories: internally promoted CEOs; externally recruited CEOs; former company executives; board directors who take on the role of CEO; and “insider-outsiders” who were recruited from outside the company and promoted into the CEO role within 18 months. An analysis of three four-year periods since 2006 confirm that S&P 500 companies are increasingly likely to promote CEOs from within rather than hire from outside; 80% of new CEOs named between 2014 and 2017 were promoted from within.
New CEO Backgrounds
Split vs. shared chairman and CEO roles
Only four of the new CEOs, 7%, were also named chair of the board, the same as in 2016. Fifty-one percent of the outgoing CEOs stayed on to serve as board chair, compared with 60% in 2016.
Is the New CEO Also the Chair?