When the CEO’s Gotta Go

In my career, I’ve observed the turnover of many CEOs. Some were terminated by their companies or boards; others simply decided that trying to stay at the top of the greased pole was too agonizing or not worth it and resigned. I have had to terminate dozens of CEOs over the years due to the nature of my firm’s work, and also in my role as corporate director and chairman of multiple companies.

However, I also personally made the decision to voluntarily leave the big, corporate corner office to work in a smaller, entrepreneurial environment. These experiences give me a distinctive perspective on both sides of the fence.

CEO departures have fluctuated in recent years along with the economic gyrations. But based on the results of a recent study of 1,227 chief executives who’d left their posts, done by Chicago-headquartered outplacement firm Challenger Gray & Christmas, 2009’s turnover was the lowest in five years. According to this survey, the main reason given for departures in 2009 (355 CEOs) was “resignation.” Another 251 CEOs retired. Only 15 were fired by their companies, and seven were “removed due to underperformance.” This was surprising to me, but I suppose it’s hard for boards to discern between poor leadership and poor results due to the Great Recession.

Since many more chiefs voluntarily vacated their posts than were fired, let’s start by looking at that side of the fence.

When the CEO Resigns

It’s a widely held belief that all employees aspire to be CEO. Of course, very few actually make it to the very top of the ladder. And sometimes if they do, they find it’s not all it was cracked up to be. Some senior-level executives get close enough to the top to shy away from it.

In a 2004 survey published in USA Today, 60 percent of the most senior executives at Fortune 1,000 companies said that they had no desire to be promoted to CEO. That’s more than twice the 27 percent who didn’t want the job just a few years earlier. The main reason: The job is too high risk.

CEO turnover now matches the normal attrition rate for all employees. It has increased so much that a 2005 article in Virginia-based consulting firm Booz & Company’s quarterly leadership magazine referred to CEOs as “The World’s Most Prominent Temp Workers.” Could it be that the age of the ephemeral CEO is here? As a consequence of the revolving door that greets the CEO on arrival at any company, real power rests more and more in the hands of the COO or other executives below the CEO level.