What's Behind the Recent Rates of C.E.O. Churn?

Fewer chief executives are leaving their jobs. But of those that do leave, a greater percentage is choosing to let themselves go.

A total of 112 C.E.O.'s left their jobs last month, bringing the year-to-date total to 1,043, according to an anecdotal report from Challenger, Gray & Christmas, the executive recruiting firm.

That is down from 124 in August and 152 in September of 2006. And the year-to-date total of 1,043 through September was below the 1,112 at the end of the same month a year earlier.

Challenger, Gray compiles the totals by tracking news reports and press releases from public and private U.S. companies of all sizes, not by a routine survey of any particular set of companies, so the results are not scientific. Still, they offer an interesting snapshot for discussion.

While the numbers suggest that the departure rate has slowed since 2006—when C.E.O. turnover peaked at 1,478, the highest since Challenger, Gray began counting in 2000—it's still a brisk pace of corner-office-emptying.

The year-to-date total, for example, is still the second-highest recorded, and at least 100 chief executives have defenestrated each month save one this year. At the current rate, 2007 would be the second-highest year recorded, and the third consecutive year of at least 1,000 C.E.O. departures.

Why?

"Many of the factors that led to record turnover in 2006 still exist today, including activist boards and shareholders, more emphasis on hitting the numbers quarter after quarter and increased scrutiny on C.E.O. behavior," said John A. Challenger, chief executive of Challenger, Gray.

At the same time, he added, there are additional reasons driving the trend, including the disclosure of costly wrongheaded investments in the subprime credit markets and the pressure for performance at the legion of companies recently acquired by heavily leveraged private-equity firms.

"In today's environment, it only takes one bad quarter to render a C.E.O. expendable," Challenger added. He cited as an example a Florida optics company that registered a 10 percent increase in sales for the fiscal year but still lost its C.E.O. following one bad quarter.

"In this situation, the departure was through a mutual agreement," Challenger said. "But one has to wonder if the board would have agreed so readily to his departure had the fourth quarter lived up to expectations."

by Mark Stein

^{Photograph by Phil Banko}