CEO Transitions 2019

Introduction

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 chair of the board in addition to CEO.

In 2019, the number of CEO transitions increased slightly, to 56 from 55 in 2018. Compared to 2018, there were fewer new CEOs (21%) hired from the outside rather than promoted from within their companies. We also saw a decline in the number of CEOs who resigned under pressure, from 22% in 2018 to 13% in 2019.

CEO Transition Overview

Fifty-six S&P 500 companies installed a new chief executive in 2019, one more than in 2018.

The top 100 largest companies by revenue had the largest share of the transitions during 2019 (25%), while companies ranking 301-400 had the smallest share of the transitions at 13%.

Breakdown of 2019 Transitions^* by S&P Company Range

^*Percentages are rounded up.

Why Do CEOs Leave?

The vast majority — 82% — of CEO transitions were attributed in company reports to the former CEO’s decision to retire or step down. This represents an increase from 2018, when 69% of transitions were driven by CEOs retiring or stepping down. In 2019, 13% of CEOs resigned under pressure according to company reports — versus 22% in 2018 — and 4% left for health reasons. One new CEO (representing the final 2%) was named as part of a company spinoff.

Reasons for CEO Transitions

CEO Profile

The average age of the incoming CEOs is 54, the same as in 2018. The average age of the outgoing CEOs is 60, versus 61 in 2018.

More than one-third, 34%, of the new CEOs have prior outside public company board experience. Seven (13%) of the new CEOs had prior public company CEO experience.

Thirty-eight percent were promoted from the COO and/or president roles, and 25% were promoted from a division CEO or president position. Six of the new CEOs were formerly the CFO, including one who served as interim CEO before becoming CEO.

Five of the new CEOs are women, representing 9% of the new CEOs. Only one woman was named CEO in 2018.

External versus Internal Successors

S&P 500 boards continue to look inside their organizations for CEO successors. Forty-four of the new CEOs — 79% — were promoted from within the company, and 84% of them were identified as part of a planned succession. In 2018, 73% of new CEOs were internal successors, with 80% the result of a planned succession.

We also examined whether the reason for the former CEO’s departure influenced the choice of successor. Our analysis shows that when a CEO resigns under pressure, the board is more likely to select a replacement from outside the company:

• 46 CEOs retired or stepped down; 39, or 85%, of their successors were internally promoted.
• 7 CEOs resigned under pressure; 2 (29%) of their successors were promoted from within and 5 (71%) were hired from the outside.

To examine longer-term trends, we further break down the internal and external CEO backgrounds into five categories. For internal, we include internally promoted CEOs, former company C-suite executives and “insider-outsiders,” who were recruited from outside the company and promoted into the CEO role within 18 months. Externally recruited CEOs and board directors fall under the external CEO category.

Split versus Shared Board Chair and CEO Roles

Five of the new CEOs, 9%, were also named chair of the board upon appointment. In 2018, 15% of the new CEOs also were named board chair. Forty-one percent of the outgoing CEOs stayed on to serve as board chair, 87% of whom already held the role of board chair.