Some interesting findings on CEO hirings and firings from a recent Economist piece:
1. Importance of finance. One-fifth of US CEOs in 2005 were formerly CFOs, almost twice the percentage from a decade prior. Increased focus on financial reporting and SOX compliance has likely augmented the CFO's overall importance within companies.
2. Build or buy? Both in Europe and the US (among the FTSEurofirst 300 and the S&P 500), "lifers" make it to the executive suite more quickly on average than "hoppers," defined as those who jump through 4 or more companies. Lifers make it in 22 (US) or 24 (EU) years on average, while hoppers take at least 26 years. Information asymmetry probably explains this difference.
3. Women at the top. Eleven percent of US CEOs were women in 2001. In the early 1980s, by contrast, there were none.
4. Time to the top. The average climb to the top took 28 years in 1980. By 2001, it took only 24. The average CEO had fewer jobs on the way up (five instead of six) and spent less time at each intermediate job (only four years) than before.
5. Naked capitalism. In a set of surprising (to me) results, EU capitalism appears to be a bit more rough-and-tumble than in the US, at least as regards CEO tenure. EU CEOs have much shorter tenures than in the US and have a tougher time staying there. They're also much less likely to be lifers in Europe (18% versus 26% in the US). Average CEO tenure over the past decade was just over 9 years in the US, but under 7 years in Europe. European CEO firings accounted for 37% of turnover, but only 27% in the US. European CEOs are also younger on average than in the US--54 versus 56 years of age.
Business Organizations, Comparative Law, Corporate Governance, Finance, Globalization/Trade | Bookmark
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1. Posted by Jake on June 3, 2008 @ 21:02 | Permalink
As strictly anecdotal evidence, over the last 25 years or so of reading the business press, I had formed an impression that more CFOs are succeeding to the CEO chair as the years go by. I would ask -- to what extent is this due to an increased focus on financial reporting and SOX compliance, as opposed to a shift in the demographics of the business class known as CFOs? Have the training and credentials of CFOs shifted towards a focus on eventual candicacy for the CEO suite?
Just ruminating a bit....
2. Posted by Robert on June 4, 2008 @ 11:38 | Permalink
I don't find this terribly surprising. This is an issue of governance structures rather than CEO performance per se. U.S. corporate governance structures and proxy access rules were designed to limit the power of institutional investors and banks. U.S. securities and corporate governance laws are predicated on numerous, diffuse individual investors, so the emphasis is on disclosure and derivative actions. European markets grew up in an environment where you either have dominant blockholders (i.e., Germany with the banks, or Italy with entrepreneurial families) or strong institutional investors (the UK). In both situations, the primary guard against managerial self-dealing is through board governance. If you have investors focused on board control, these strong boards would seem more likely to jettison a CEO than in the U.S., where boards are more often than not extensions of the CEO and where investors focus on shareprice and courtrooms to protect their property interests.
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