New research reveals chief executive 'churn' as myth

March 15, 2012
Professor Malcolm Higgs led the research. Credit: University of Southampton

Research into the leadership structure of the UK's largest companies, carried out by the University of Southampton in collaboration with executive search consultants Thorburn McAlister, suggests turnover rates or 'churn' in the position of chief executive are much lower than commonly perceived.

A report funded by Thorburn McAlister and the Southampton Management School examined data from companies in the FTSE-350 index to explore changes in senior executive and board positions over a five year period.

Results show:

  • just 51 chief executives moved to their job from another position.
  • 66 per cent of recruited chief executives in the FTSE-350 are internal appointments. This may indicate that boards wish to maintain strategic continuity by appointing home-grown talent.
  • average length of service of a chief executive in the FTSE-350 is 6.35 years and 5.91 in the FTSE-100. Previous reports of tenure in the FTSE-100 have suggested an average figure of 3.25 years.
  • markets appear to value long-service and maturity – with chief executives in service for more than 10 years demonstrating the highest growth in their company's share price.
  • 85 per cent of chief executives in the FTSE-350 are of the baby-boomer generation (born 1945-65), with just 13 per cent from generation-X (born 1966-80) and none from generation-Y (born post 1981).
  • just 14 chief executives in the study were women.
Research leader, and Head of the Southampton Management School, Professor Malcolm Higgs comments, "It is accepted wisdom that chief executives are highly vulnerable to being attracted to a higher paying role, ready to leave for a better deal – but our research challenges this.

"Evidence suggests their moving around occurs far less than assumed, with little movement from one chief exec position to another. In these financially turbulent times, with pay and bonuses in the spotlight, we should ask ourselves if high levels of remuneration are really keeping people in post, or if the impetus to move isn't as strong as perceived."

Professor Higgs continues, "Furthermore, the large number of current chief execs in the baby-boomer generation, and comparatively low numbers in generation-X, raises the question of whether we can maintain our chief exec talent? Do we have a talent gap? Or are we better at nurturing talent internally in companies than we have tended to think?"

Researchers used the HemScott Company database on UK-domiciled and publicly traded stocks (now Morningstar Company Intelligence) to gather company data and details of directorships. Where necessary, this was supplemented and verified with analysis from company websites and archived data.

Director at Thorburn McAlister, Anthony McAlister, comments, "This review will help inform organisations and develop better talent management practices. Year on year it will build into an outstanding resource for FTSE 350 stakeholders."

The information in the report was taken as a snapshot view on 1 August 2011. In addition to information on chief executives, the research also examined data on chairmen, financial directors and board positions in the FTSE-350.

Explore further: Rice study shows why more than 25 percent of new CEOs last less than 3 years

Related Stories

Underwater stock options drive top executives turnover

November 20, 2008

When the market price of company stock falls below the exercise price, the options are considered to be "out of the money" or underwater. Many publicly traded firms have become concerned about retaining highly valued executives ...

SAP CEO resigns, replaced by 2 co-chief executives

February 8, 2010

(AP) -- The chief executive of German software company SAP AG, Leo Apotheker, has resigned after his contract was not renewed and will be succeeded by two co-CEOs, the company said Sunday.

Google product chief leaves as Page takes helm

April 5, 2011

Larry Page's first day as Google chief executive on Monday was marked with the resignation of the executive in charge of search, Android and other major products at the Internet powerhouse.

Recommended for you

Earliest evidence of reproduction in a complex organism

August 3, 2015

Researchers led by the University of Cambridge have found the earliest example of reproduction in a complex organism. Their new study has found that some organisms known as rangeomorphs, which lived 565 million years ago, ...

Model shows how surge in wealth inequality may be reversed

July 30, 2015

(Phys.org)—For many Americans, the single biggest problem facing the country is the growing wealth inequality. Based on income tax data, wealth inequality in the US has steadily increased since the mid-1980s, with the top ...

French teen finds 560,000 year-old tooth (Update)

July 28, 2015

A 16-year-old French volunteer archaeologist has found an adult tooth dating back around 560,000 years in southwestern France, in what researchers hailed as a "major discovery" Tuesday.

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.