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Published: May 24, 2012
 / Summer 2012 / Issue 67

 
 

CEO Succession 2011: The New CEO’s First Year

So it is particularly important that new CEOs learn as much as they can from other CEOs who have experience dealing with these changing circumstances. Our hope is that new CEOs, and those who aspire to be CEOs in the future, will find our analysis of the succession data — and the advice offered by the chief executives we spoke to in preparing this study — helpful in making the most of their opportunity.

Methodology

This study identified the world’s 2,500 largest public companies, defined by their market capitalization (from Bloomberg) on January 1, 2011. Our research team members — based in India, China, Romania, Chile, and the United States — then identified the companies among the top 2,500 that had experienced a chief executive succession event and cross-checked data using a wide variety of printed and electronic sources in many languages. For a listing of companies that had been acquired or merged in 2011, we also used Bloomberg.

Each company that appeared to have changed its CEO was investigated for confirmation that a change occurred in 2011, and additional details — title, tenure, chairmanship, and so on — were sought on both the outgoing and incoming chief executives (as well as any interim chief executives).

Company-provided information was acceptable for most data elements except the reason for the succession. Outside press reports and other independent sources were used to confirm the reason for an executive’s departure. Finally, Booz & Company staff worldwide separately validated each succession event as part of the effort to learn the reason for specific CEO changes in their regions.

Total shareholder return data for a CEO’s tenure was sourced from Bloomberg and includes reinvestment of dividends (if any). Total shareholder return data was then regionally market-adjusted (measured as the difference between the company’s return and the return of the local regional index over the same time period) and annualized.

Reprint No. 12207

Author Profiles:

  • Ken Favaro is a senior partner with Booz & Company based in New York. He leads the firm’s work in enterprise strategy and finance.
  • Per-Ola Karlsson is a senior partner with Booz & Company based in Stockholm. He is managing director of the firm’s European business.
  • Gary L. Neilson is a senior partner with Booz & Company based in Chicago. He focuses on operating models and organizational transformation.
  • Also contributing to this article were Booz & Company senior partners Ivan de Souza, Karim Sabbagh, and Edward C. Tse; partners Stefan Eikelmann, Hilal Halaoui, Masahiro Kishida, David Levy, Greg Rotz, and Kazutoshi Tominaga; principals Carlos Gondim and Nadia Kubis; senior associate Marc Johnson; and senior consultant Jane Kim; and contributing editor Edward H. Baker.

 

 
 
 
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Resources

  1. Ken Favaro, Per-Ola Karlsson, and Gary L. Neilson, “The Four Types of CEOs,” s+b, Summer 2011: Last year’s study suggested that the nature of the CEO’s job varies with the role of the corporate core — and that the more involved headquarters is in operational decision making in any given company, the more fragile the CEO’s tenure is likely to be.
  2. Ken Favaro, Per-Ola Karlsson, Jon Katzenbach, and Gary L. Neilson, “Lessons from the Trenches for New CEOs: Separating Myths from Game Changers,” Booz & Company white paper, January 2010: The practices that will substantially contribute to success for new CEOs.
  3. Ken Favaro, Per-Ola Karlsson, and Gary L. Neilson, “CEO Succession 2000–2009: A Decade of Convergence and Compression,” s+b, Summer 2010: This study documented a decade’s worth of CEO succession trends and noted how governance norms are converging and the job of the CEO is compressing, in terms of both tenure and capacity.
  4. Gary L. Neilson and Julie Wulf, “How Many Direct Reports?Harvard Business Review, April 2012: An author of this article and a Harvard Business School professor discuss why the CEO’s average span of control, measured by the number of direct reports, has doubled, rising from about five in the mid-1980s to almost 10 in the mid-2000s.
  5. For more thought leadership on this topic, see the s+b website at: strategy-business.com/strategy_and_leadership and the Booz & Company website at: booz.com/global/home/what_we_think/featured_content/ceo_succession.
 
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