Companies forced chief executives out of their jobs at a record rate last year,
according a study by Booz Allen Hamilton, a technology consulting firm. The study
found forced departures of chief executives increased by more than 70 percent
in 2002 over 2001.
Of all chief executive officer departures globally in 2002, 39 percent were
forced, performance-based changes, compared to 25 percent in 2001. The total
number of CEO changes increased by 10 percent.
Chief executives who were dismissed in 2002 generated median regionally adjusted
shareholder returns 6.2 percentage points lower than CEOs who retired voluntarily,
the study found. It took an 11.9 percent shortfall to prompt a firing in 2001;
in 2000, fired CEOs underperformed retiring chiefs by 13.5 percent.
"Business leaders are enduring scrutiny and pressure unseen since the
Great Depression," says Charles Lucier, senior vice president emeritus
of Booz Allen Hamilton. "The CEO mystique has all but evaporated, and director
activism has replaced crony capitalism in the boardroom."
North America accounted for 48 percent of all successions worldwide in 2002,
significantly lower than the 64 percent it accounted for in 2001. Regionally,
the biggest change occurred in the Asia/Pacific region, which accounted for
nearly one of every five (19 percent) global succession events, compared with
8 percent in 2001 and 6 percent in 2000. Forced turnover in Asia accounted for
45 percent of all transitions there, up from only 6 percent in 2001.
Telecommunications services had the highest rate of forced turnover in 2002
(9.4 percent), followed by utilities (5.7 percent), materials (5.2 percent),
and information technology (4.7 percent).
Booz Allen studied the 253 CEOs of the world's 2,500 publicly-traded corporations
who left office in 2002, and evaluated both the performance of their companies
and the events surrounding their departure. To provide historical context, Booz
Allen evaluated and the compared this data to information on CEO departures
for 1995, 1998, 2000 and 2001.