Corporate Executive Turnover

Public Companies

By Ryan Deatrick

Senior leadership is a crucial component of any company.  The senior management team is typically the face of the company and is responsible for overseeing operations and developing and implementing strategic initiatives.  Because of the significance of senior management, the Securities and Exchange Commission issued a rule in August of 2004 that required public companies to disclose the departure of a director or principal officer under Form 8-K. 

Audit Analytics, an on-line public company research organization, recently compiled statistics on executive departures during the 10 years since the SEC required such disclosures.  The stated objectives of Audit Analytics were to determine the number of Chief Executive Officer (CEO) and Chief Financial Officer (CFO) departures and to determine the percentage of companies that experienced such departures.

As it relates to CEOs, Audit Analytics found that departures reached a pinnacle in 2008, with 1,602 departures impacting 1,400 unique companies.  This represented 14.8% of all public companies during 2008.  Overall, departures climbed steadily from 2005 (1,275) to 2008 before steadily declining to 2014 (1,124).  However, the percentage of companies affected by CEO departures has not significantly declined since 2008 due to a decrease in the number of public companies.  In 2014, approximately 13.2% of companies experienced a CEO departure.  Audit Analytics also found that the 8-Ks filed in relation to CEO departures generally indicated a mutual separation and did not portray the CEO negatively.  Dismissal and involuntary CEO departures ranged from 2.1% to 5.1% during the 10 years analyzed, with the low of 2.1% coming in 2014.  When reasons were given for the departures in 2014, the most common reason was the result mergers and acquisitions.

As for CFOs, the number of departures also topped out in 2008, with 1,782 departures impacting 1,537 companies.  This represented 16.3% of all public companies during 2008.  Similar to CEOs, the number of CFO departures and the percentage of companies impacted increased steadily from 2005 to 2008.  These figures declined steadily in 2009 and 2010 before reaching a plateau from 2011 to 2014.  In 2014, there were 1,147 departures and approximately 13.8% of companies were impacted.  Like CEOs, departures generally indicated mutual separations or resignations.  Dismissals and involuntary CFO departures ranged from 1.7% to 6.1%, with the low of 1.7% again coming in 2014.  When reasons were given for departures in 2014, the most common reason for CFO departures was the pursuit of other opportunities.

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