Report: In Today's Cutthroat Competition, Low-Performing CEOs Have Less Chance of Keeping Their Job
A new report by The Conference Board, ESGAUGE, Heidrick & Struggles, and Semler Brossy reveals increasing pressure on underperforming CEOs. 42% of S&P 500 companies that changed CEOs in 2024 had total shareholder returns below the 25th percentile, up from 30% in 2017. While women CEOs increased to 10% in S&P 500 companies, 69% lead smaller firms with revenue under $5 billion. The study shows 77% of new S&P 500 CEOs were internal hires, with external hires commanding 33% higher compensation. CEOs are staying longer, with succession rates for those 64+ dropping 8% in 2024, potentially indicating a future 'retirement cliff'.
Un nuovo rapporto di The Conference Board, ESGAUGE, Heidrick & Struggles e Semler Brossy rivela una crescente pressione sui CEO che non raggiungono le performance attese. Il 42% delle aziende S&P 500 che hanno cambiato CEO nel 2024 avevano rendimenti totali per gli azionisti al di sotto del 25° percentile, in aumento rispetto al 30% nel 2017. Sebbene le CEO donne siano aumentate al 10% nelle aziende S&P 500, il 69% dirige aziende più piccole con fatturato inferiore a 5 miliardi di dollari. Lo studio mostra che il 77% dei nuovi CEO S&P 500 erano assunti interni, mentre gli assunti esterni ricevono una retribuzione superiore del 33%. I CEO rimangono in carica più a lungo, con i tassi di successione per quelli di età pari o superiore a 64 anni che sono diminuiti dell'8% nel 2024, il che potrebbe indicare un futuro 'cliff del pensionamento'.
Un nuevo informe de The Conference Board, ESGAUGE, Heidrick & Struggles y Semler Brossy revela una creciente presión sobre los CEO que no están rindiendo. El 42% de las empresas S&P 500 que cambiaron de CEO en 2024 tuvieron rendimientos totales para los accionistas por debajo del percentil 25, un aumento respecto al 30% en 2017. Aunque las CEO mujeres aumentaron al 10% en las empresas S&P 500, el 69% lidera empresas más pequeñas con ingresos inferiores a 5 mil millones de dólares. El estudio muestra que el 77% de los nuevos CEO de S&P 500 fueron contratados internamente, mientras que las contrataciones externas reciben una compensación 33% mayor. Los CEO están permaneciendo más tiempo, y las tasas de sucesión para aquellos de 64 años o más cayeron un 8% en 2024, lo que podría indicar un futuro 'acantilado de jubilación'.
The Conference Board, ESGAUGE, Heidrick & Struggles, Semler Brossy의 새로운 보고서에 따르면, 성과가 저조한 CEO에 대한 압력이 증가하고 있습니다. S&P 500 기업 중 42%가 2024년에 CEO를 교체했으며, 이들 기업의 총 주주 수익률은 25번째 백분위수 이하로 나타났습니다. 이는 2017년의 30%에서 증가한 수치입니다. 여성 CEO의 비율은 S&P 500 기업에서 10%로 증가했지만, 69%는 50억 달러 미만의 수익을 올리는 작은 기업을 이끌고 있습니다. 연구에 따르면, S&P 500의 새 CEO의 77%가 내부에서 채용된 것으로 나타났으며, 외부에서 채용된 CEO는 33% 더 높은 보상을 받고 있습니다. CEO들은 더 오래 재직하고 있으며, 64세 이상의 CEO의 후임자 비율은 2024년에 8% 감소하여 장래의 '은퇴 절벽'을 나타낼 수 있습니다.
Un nouveau rapport de The Conference Board, ESGAUGE, Heidrick & Struggles et Semler Brossy révèle une pression croissante sur les PDG peu performants. 42% des entreprises S&P 500 qui ont changé de PDG en 2024 avaient des rendements totaux pour les actionnaires inférieurs au 25e percentile, en hausse par rapport à 30% en 2017. Bien que le nombre de PDG femmes ait augmenté à 10% dans les entreprises S&P 500, 69% dirigent des entreprises plus petites avec des revenus inférieurs à 5 milliards de dollars. L'étude montre que 77% des nouveaux PDG S&P 500 étaient des recrutements internes, tandis que les recrutements externes obtiennent 33% de compensation en plus. Les PDG restent en fonction plus longtemps, avec des taux de succession pour ceux de 64 ans et plus diminuant de 8% en 2024, ce qui pourrait indiquer un futur 'cliff de la retraite'.
Ein neuer Bericht von The Conference Board, ESGAUGE, Heidrick & Struggles und Semler Brossy zeigt einen wachsenden Druck auf unterdurchschnittlich abschneidende CEOs. 42% der S&P 500 Unternehmen, die 2024 die CEOs gewechselt haben, hatten Gesamtrenditen für die Aktionäre, die unter dem 25. Perzentil lagen, ein Anstieg von 30% im Jahr 2017. Während die weiblichen CEOs auf 10% in den S&P 500 Unternehmen gestiegen sind, leiten 69% kleinere Firmen mit einem Umsatz von weniger als 5 Milliarden Dollar. Die Studie zeigt, dass 77% der neuen S&P 500 CEOs interne Einstellungen waren, während externe Einstellungen 33% höhere Vergütung erhielten. CEOs verbleiben länger im Amt, wobei die Nachfolgewahrscheinlichkeiten für die über 64-Jährigen 2024 um 8% gesunken sind, was auf eine zukünftige 'Ruhestandsklippe' hindeuten könnte.
- Internal CEO promotions remain strong at 77% for S&P 500 companies
- Women CEO representation increased to 10% in S&P 500, up 4 percentage points since 2018
- Longer CEO tenures indicate stability, with 27% of incoming S&P 500 CEOs having 20+ years company experience
- 42% of S&P 500 companies changing CEOs had poor performance (below 25th percentile TSR)
- External CEO hires cost 33% more than internal promotions
- 69% of women CEOs are to smaller companies (<$5B revenue)
- Only one woman CEO appointment at companies over $25B revenue
Insights
The study reveals significant shifts in CEO dynamics that impact investor decision-making. The rising correlation between poor total shareholder returns and CEO turnover (
The gender disparity in CEO appointments, particularly at larger firms, indicates potential talent pipeline issues that could affect long-term corporate performance. The preference for internal promotions (
For investors, these trends suggest: 1) increased likelihood of leadership changes in underperforming companies, 2) higher compensation costs when external CEOs are hired and 3) potential succession risks due to aging CEOs staying longer in their roles.
That is according to a new report by The Conference Board, ESGAUGE, Heidrick & Struggles, and Semler Brossy. The study examines several aspects of CEO succession, including a gender analysis: While the share of women CEOs has grown, the vast majority (
The study also reveals that CEOs are staying in their roles longer. For example, succession rates for those aged 64 and older dropped by
Additional findings include:
CEO Succession and Firm Performance
There's a growing link between total shareholder returns and whether CEOs are shown the door:
- S&P 500:
42% of companies that changed CEOs in 2024 had a TSR that fell below the 25th percentile, indicating low firm performance. This share has steadily increased from30% in 2017. Russell 3000: Nearly half (45% ) of companies that changed CEOs had a TSR below the 25th percentile, increasing from29% in 2017.- Increased pressure on underperforming CEOs: "The gap in succession rates between low- and high-performing companies has widened significantly. It's a clear signal to CEOs: Deliver value or face heightened scrutiny. However, boards should be cautious about overemphasizing short-term results at the expense of long-term strategy and sustainability," said Lyndon Taylor, Partner at Heidrick & Struggles.
Women CEOs
The number of female CEOs has steadily risen in recent years, but significant progress remains:
- S&P 500: Women held
10% of CEO positions in 2024, a 4-percentage-point increase since 2018. Russell 3000: Women held8% of CEO positions, a 3-percentage-point increase since 2018.- Despite gains, more work to be done: "To truly move the needle, larger firms should consider examining their talent pipelines and succession planning processes. The rapid increase of women on boards shows more change is possible," said Blair Jones, coauthor of the report and Managing Director at Semler Brossy.
Internal vs. External CEO Hires
Companies continue to favor internal promotions for CEO openings:
- S&P 500:
77% of new CEOs were internal hires in 2024. Russell 3000:59% were internal hires.- In-house experience remains valuable: "Internal candidates are often favored due to their extensive institutional knowledge and understanding of company culture. Yet, our research shows that firms facing performance declines tend to recruit externally, likely because their new insights can catalyze transformation," said Jason Schloetzer, coauthor of the report and professor at
Georgetown University.
It pays to stay put: At larger companies, nearly
- S&P 500: The share of incoming "insider" CEOs with +20 years of tenure-in-company is
27% in 2024, up from18% in 2022. Average tenure of incoming internal CEOs is 17 years. Russell 3000: Average tenure is 10 years.
Incoming CEOs are paid less than externally hired ones:
- S&P 500 and
Russell 3000: On average, externally hired CEOs were paid33% more than internal CEOs in 2023. - External hires need more incentives: "Internal candidates are often new to the job, and their long-term incentive plan tends to increase their pay as they gain skills in the role. Moreover, internal candidates have already accumulated equity in the company, whereas outside hires need upfront grants to replace the equity from their prior job," said Umesh Tiwari, Executive Director of ESGAUGE.
Note: Findings are based on proxy statements by
About The Conference Board
The Conference Board is the member-driven think tank that delivers Trusted Insights for What's Ahead™. Founded in 1916, we are a non-partisan, not-for-profit entity holding 501 (c) (3) tax-exempt status in
About ESGAUGE
ESGAUGE is a data mining and analytics firm uniquely designed for the corporate practitioner and the professional service firm seeking customized information on US public companies. It focuses on disclosure of environmental, social, and governance (ESG) practices such as executive and director compensation, board practices, CEO and NEO profiles, proxy voting and shareholder activism, and CSR/sustainability disclosure. Our clients include business corporations, asset management firms, compensation consultants, law firms, accounting and audit firms, and investment companies. We also partner on research projects with think tanks, academic institutions, and the media. www.esgauge.com
About Heidrick & Struggles
Heidrick & Struggles (Nasdaq: HSII) is a premier provider of global leadership advisory and on-demand talent solutions, serving the senior-level talent and consulting needs of the world's top organizations. In our role as trusted leadership advisors, we partner with our clients to develop future-ready leaders and organizations, bringing together our services and offerings in executive search, diversity and inclusion, leadership assessment and development, organization and team acceleration, culture shaping, and on-demand, independent talent solutions. Heidrick & Struggles pioneered the profession of executive search more than 70 years ago. Today, the firm provides integrated talent and human capital solutions to help our clients change the world, one leadership team at a time.® www.heidrick.com
Semler Brossy
Semler Brossy is a leading independent consulting firm. We partner with Boards, Compensation and Human Capital Committees, and Management teams to develop sound executive compensation and talent strategies that address critical business issues, drive sustainable business performance, align with stockholders' key priorities, and steward the organization towards the long term. We serve a broad cross-section of companies across industries, from the largest global corporations to smaller, privately held firms. Clients choose us for our partnership, thorough thinking, and creative solutions. We take off where other firms finish. www.semlerbrossy.com
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SOURCE The Conference Board
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