The Year of CEO Ousters

Of the big-company CEOs who’ve left so far in 2024, a new study from Korn Ferry found that nearly 40 percent have been forced out. “A CEO departure is always a shock to the system,” says Korn Ferry’s Alan Guarino. “When a CEO transitions, all types of dynamics surface calling the success of the company's future into question.” Let’s take a look at why CEOs are being forced out and we also highlight a report from Spencer Stuart which looks at CEO transitions over the past year!

September 5, 2024 – A CEO fired for a run of slow sales, another forced out due to their inability to regain the confidence of customers and other stakeholders, and a third who resigned because his cost-cutting strategy failed to improve profitability. It appears that 2024 is a year in which many boards have lost patience with CEOs, according to a recent report released by Korn Ferry. Of the 191 Russell 3000 Index company heads who have left this year, 74—or nearly 40 percent—were reportedly fired or forced out, according to data compiled by exechange.com, a research provider that analyzes public sources to track executive changes. That’s the most at this time of year since the firm began tracking CEO departures in 2017.

“Regardless of the reason, a CEO departure is always a shock to the system,” said Alan Guarino, vice chairman in Korn Ferry’s board and CEO Services practice. “When a CEO transitions, all types of dynamics surface calling the success of the company’s future into question.”

But it’s not just the sheer number of CEOs being forced out that is intriguing experts; it’s the various strategies boards have used to hire the next boss. Some firms have—without the existing CEO’s knowledge—searched and lined up an outsider to take over. “This isn’t a common tactic, though, because many boards don’t maintain a list of external prospects,” said Joe Griesedieck, vice chairman and managing director in Korn Ferry’s board and CEO services practice. “Boards should always be prepared for an unexpected CEO transition,” he says.

“Going this route also means boards must be extremely tight-lipped and leaks can occur even amid the most well-intentioned processes,” said Radhika Papandreou, president of Korn Ferry North America. “A leak could be more disruptive to a company than a prolonged public search.”

This year, many companies have relied on a more conventional route: firing the CEO and installing an interim replacement. “The interim boss is often a member of the board or executive leadership team,” Ms. Papandreou says. “This temporary appointment bridges the transition, enabling the company to conduct a thorough search (experts caution against taking too long to name a new boss, though; this can leave a company and its stakeholders in limbo).”

Other boards have announced the imminent departure of the outgoing CEO and the start date of the new one. Some companies have named the successor publicly; others have waited until that person officially takes over. Companies will often use the second approach when they’ve selected an outsider who, for whatever reason, cannot assume leadership right away.

Interim Leaders: Proven Experts at a Time of Crisis

In times of sudden change or instability, interim leaders can be the preferred solution for an organization, leveraging a range of skills and experiences to keep a company on course. A new report from Witt/Kieffer explores the many benefits of interim leadership for organizations of all sizes in today’s challenging business environment.

Three years after the pandemic began, the widespread impacts that COVID has had on health systems continue to persist, according to the report. “Even today, the effects are still being felt at every level, with continuous pressure placed on staffing and finances for health systems of all sizes,” the study said. This has led to widespread burnout among healthcare professionals, with over half reporting symptoms of anxiety, depression, or post-traumatic stress disorder, according to the U.S. Surgeon General’s office. Similarly, and just as unfortunate, the pandemic has delivered financial stress to health systems, as safety protocols forced mass cancellations of elective procedures and numerous factors caused unsustainable increases in labor costs.

Mr. Guarino cautions that thinking about the next CEO should be an ongoing project. “It should not be something that’s done only when a CEO transition is imminent,” he said.

CEO Transitions Declining Overall

Over the past year, the number of S&P 1500 transitions declined the previous year and have not yet returned to pre-pandemic levels, according to findings from Spencer Stuart’s CEO Transitions report. Transitions among the large-cap S&P 500 companies had been on track for a “normal” year of transitions but ultimately were lower than pre-pandemic averages, weighed down by unusually low turnover in the fourth quarter, the study found. In addition, the move toward older CEOs and, among S&P 500 companies, experienced CEOs continued.

What’s less evident in the data is the evolution Spencer Stuart saw in how boards are thinking about the qualities and capabilities CEOs need, both today and in the future. How should the profile of CEOs evolve amid dramatic shifts in the scale, scope, pace and interconnectedness of business challenges and the broader and more complex stakeholder demands CEOs are facing?

In addition to attributes traditionally associated with CEO excellence — such as strategic thinking and the ability to get results — boards are weighing attributes that point to candidates’ ability to stretch and respond to new challenges,” the Spencer Stuart report said. “These include systems thinkers who can make sense of the forces at play for the business, connectors who think more broadly about potential partners and ecosystems to expand opportunities, and agile operators with the skill and courage to act on the implications of these forces, the empathy to connect with diverse stakeholders, and the ability to cultivate and use an ecosystem of information and talent.”

S&P 1500 transitions have not bounced back to pre-pandemic levels, and overall fewer companies appointed new CEOs in 2023. Across the S&P 1500, Spencer Stuart found that 136 companies named new CEOs, a decline from 146 in 2022. After the strongest first quarter of the year in a decade (58 transitions versus 65 in 2013), transitions trailed historic averages the remainder of the year and were particularly soft in the fourth quarter.

Spencer Stuart believes that some CEOs held on to wait for an economic rebound, and many boards pushed succession timelines out to retain a seasoned CEO in the face of continued macroeconomic, social and geopolitical instability. Forty-six S&P 500 companies appointed a new CEO in 2023, down from 56 in 2022 — and fewer than the historically low level of 48 during the pandemic year 2021. CEO transitions among MidCap 400 companies rebounded to 40 in 2023, after hitting a 10-year low of 33 transitions in 2022. Fifty SmallCap 600 companies appointed new CEOs, a decline from 2022.

Relate: Preparing for Shorter CEO Tenures

Contributed by Scott A. Scanlon, Editor-in-Chief and Dale M. Zupsansky, Executive Editor – Hunt Scanlon Media

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