The year 2019 could be called the year of the CEO exodus. In 2019 so far, 1,480 chief executives at U.S. companies with at least 10 employees that have been open for at least two years have left their posts, according to a report out Wednesday from the outplacement firm Challenger, Gray & Christmas.
That’s the highest January-November total of CEO exits since the firm began tracking CEO exits in 2002, and it’s hardly surprising to anybody who’s been paying attention.
It seems like every week there’s another high-profile CEO exit — from Nike (NKE) to WeWork to the C-suite shakeup at Expedia (EXPE) and CEO departures at United Airlines (UAL) and Foursquare. Just this week, the CEO of Away stepped down following a report from The Verge alleging the direct-to-consumer luggage company has a toxic culture.
Other major exits this year include Under Armour’s (UA) Kevin Plank, Boeing Commercial Airplanes’ (BA) Kevin McAllister, and Melanie Whelan, the CEO of SoulCycle, whose company has faced competition from newly public at-home exercise company Peloton (PTON).
The list goes on. This year saw an extraordinary number of CEO exits — retirements, forced resignations, ousters — but CEO turnover was on the rise before this year.
A PwC analysis of the world’s largest 2,500 public companies found that CEO turnover hit a then-record high in 2018. And a report last year from the executive data firm Equilar found CEO turnover has shortened the median tenure of CEOs at S&P 500 companies; the median tenure of CEOs at large-cap companies was 6 years in 2013 but had fallen to five years since 2017.
What’s behind this sea change? Experts attribute it to a combination of factors, including the rise of activist investors pushing for a shift in direction at public companies. Moreover, the public has new, more stringent expectations for CEOs’ behavior. Behavior that might have been acceptable in decades past — like dating a subordinate — won’t fly today, especially in the wake of the #MeToo Movement.
“What’s acceptable behavior and what’s not acceptable behavior has changed enormously,” Margarethe Wiersema, a professor at the business school at the University of California, Irvine, told Yahoo Finance. “The expectations have shifted. What you might call the norms of behavior have shifted.”
‘Not above judgment on their personal life’
There is data to back up the observation that CEOs’ ethical lapses are driving turnover. In May of this year, the PwC study of the world’s biggest 2,500 public companies found that the overall rate of forced CEO turnovers was about 20% in 2018 — roughly in line with previous years. But for the first time in the study’s 19-year history, more CEOs were dismissed for ethical lapses than for poor financial performance or issues with the board.