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, often 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 chair of the board in addition to CEO.
In 2018, the number of CEO transitions fell slightly, to 55 from 59 in 2017. In contrast to the recent past yet similar to 2017, a higher percentage of the new CEOs (27%) were hired from outside rather than promoted from within their companies. In 2017, 31% of new CEOs were hired from the outside, following a three-year decline in external hires (reaching a low of 10% in 2016).
The longer-term trend has been toward developing internal CEO successors, due in part to the Sarbanes-Oxley legislation, the professionalization of the human resources function and boards’ increasing commitment to long-term CEO succession planning as a best practice. The reversal of that internally weighted trend in 2017 and 2018 may be attributed to a variety of factors, including individual company strategy shifts requiring new and different leadership, activist investors, the #MeToo movement, digital disruption and the intense pace of change. We will continue to monitor these trends.
CEO Transitions Overview
Fifty-five S&P 500 companies installed a new chief executive in 2018, four less than in 2017.
S&P 500 CEO Transitions 2008-2018
Companies ranking 301 to 400 in revenue had the largest share of the transitions during 2018 (27%), while companies ranking 101-200 had the smallest share of the transitions at 13%.
Percentage of Transitions* by S&P Company Range
* Percentages are rounded up
Why do CEOs Leave?
The vast majority — 69% — of CEO transitions were attributed in company reports to the former CEO’s decision to retire or step down. This represents a decline from 2017, when 73% of transitions were driven by CEOs retiring or stepping down. In 2018, 22% of CEOs resigned under pressure according to company reports — versus 15% in 2017 — and 5% left for health reasons. Another 3% left as a result of a merger
Reasons for CEO Transitions
*Other includes the appointment of a co-CEO or situations where there was no CEO transition out of the role, such as when one co-CEO becomes the sole CEO.
The average age of incoming CEOs is 54, five years younger than the average in 2017 (59). The average age of the outgoing CEOs is 61. Just one of the 55 new CEOs is a woman, compared with seven of 59 new CEOs in 2017. Eleven (20%) of the new CEOs had prior public company CEO experience.
External vs. Internal Successors
Seventy-three percent (40) of the new CEOs were promoted from within the company. In 2017, 69% of new CEOs were internal successors. Thirty-two of the internal CEO promotions, 80%, resulted from a planned succession.
CEO Successors: External vs. Internal Candidates
This year, we also examined whether the former CEO’s reason for leaving influenced the likelihood that a board would select an internal or external successor. Our analysis shows that when a CEO resigned under pressure, his or her replacement was more likely to have been hired from outside:
38 CEOs retired or stepped down; 31 (82%) of their successors were promoted from within and seven (18%) were hired from the outside.
12 CEOs resigned under pressure; five (42%) of their successors were promoted from within and seven (58%) were hired from the outside.
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 2007 suggests a longer-term trend toward internal successors. However, the 75% average for internal placements during the period between 2015 and 2018 includes both the highest and lowest number of external successors of the entire analysis.
Split vs. Shared Board Chair and CEO Roles
Eight of the new CEOs, 15%, were also named chair of the board. In 2017, just 7% of the new CEOs also were named board chair. Thirty-five percent of the outgoing CEOs stayed on to serve as board chair, compared with 51% in 2017.
Is the New CEO also the Board Chair?
*Percentages do not total 100% because we did not include one company for which the former chair/CEO became chair and co-CEO with another co-CEO.
For the detailed list of transitions and transition data, please download our PDF.