High Turnover Rate Batters High-Tech CEOs

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Success doesn’t always bring stability — at least not in the IT industry.

CEOs at high-tech companies have a higher turnover rate than in any other industry, according to a new study from Booz Allen Hamilton, Inc., a management and technology consulting firm. Chief executives are falling short of the high standards being set in record numbers, notes the firm’s second annual report on CEO turnover.

”Business leaders are enduring scrutiny and pressure unseen since the Great Depression,” said 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.”

Lucier adds that the study’s results underscore the mounting influence of shareholders and corporate directors. Boards of directors are exercising their power on behalf of shareholders with a vigor unseen in modern times, the study notes.

”This phenomenon is now fully global, even in regions not burdened by governance scandals,” Lucier noted. CEOs are being replaced at a faster rate in Europe than the United States, and CEO turnover has skyrocketed in Asia, where chief executives of major corporations had been relatively protected from market forces.

”There is no longer any safe haven for chief executives who can’t deliver superior results,” Lucier concluded.

The number of CEOs who were involuntarily moved out of their jobs in 2002 increased by more than 70 percent over the year before, according to the study. Of all CEO departures worldwide in 2002, 39 percent were forced, performance-based changes. That’s comparable to 25 percent in 2001.

And things are looking up in the U.S. North America accounted for 48 percent of all successions worldwide in 2002. That’s dramatically lower than the 64 percent it accounted for in 2001.

The biggest regional change occurred in Asia/Pacific, though. That area accounted for nearly one out of every five (19 percent) CEO successions. That’s compared with the region’s 8 percent rate in 2001, and 6 percent in 2000.

And the Booz Allen Hamilton study also shows that CEOs are getting a little older.

CEOs grew a bit grayer last year. The mean age of chief executives leaving office in 2002 was 58.1, up slightly from 56.8 in 2000 and 57.1 in 2001.