A quiet but surprising trend is rising throughout the industry. This is a record increase in CEO replacements, resignations and retirements. In 2024, around 1,991 chief executives left their positions in 2024, representing 16% departures from 2023.
Forced departures in troubled businesses that include well-known exiles from Intel, Starbucks, Boeing, Nike, CVS, Hertz, Stellantis and Peloton Interactive. However, the number of CEOs voluntarily making unscheduled departures has also increased, according to executive placement company Russell Reynolds Associates. “You could call it 'premature inheritance', but you can see evidence that CEO frequency and acceptance have resigned from their role, citing pressure, choice of life's priorities, or simply that the conditions for their success are at risk.”
“More CEOs are 'leaving'” before you fire me,” says Patrick Thean, executive coach and CEO of Rhythm Systems. If the CEO doesn't believe there's a chance they'll take themselves away. ”
The board is taking notes. In fact, 61% of directors report that recent departures in prominent companies have sparked new conversations about the risk of senior-level turnover within the company. Corporate Board Members And Farint Advisor.
Crosshair CEO
Directors who understand and try to deal with Exodus can first see many drivers, including today's leaders' volatility and great pressure to counter unprecedented changes. It focuses on short-term performance, geopolitical turbulence, and talent concerns. When the headwinds hit, the CEO gets straight to the shooting line as he points out in cover stories for former Medronic CEO and former Goldman Sachs board member Bilgeorge, ExxonMobil, Novartis and Target. “I know one case where the CEO was given 16 months,” he says. “How can we turn the culture around in 16 months? They're responding too quickly to external forces. That's not right.”
Additional challenges stem from supply chain issues, surges in inflation, labor shortages, a decision to “return to offices” in place, political disparities within the country, and the aftermath of the pandemic that has led to geopolitical conflicts that continue to plague businesses. Many CEOs are tired of the need to continually adapt and adapt to a series of headwinds, according to Kathy Gersch, chief commercial officer at change management company Kotter. “They are experiencing 'change fatigue'. ”
Matt Paese, executive coach and SVP at Development Dimensions International, notes that disruptive forces such as the influx of AI and the impact on the workforce may be planning a CEO's sense of comfort at work and a stay. “I see CEOs struggling existentially in that development arc,” he says. “They are asking themselves: “How can I start to rethink this? What should I do? What should my senior team do?” They said, “Did you want to do this?” This is one of the factors that influence the CEO's tenure, and I think it's suddenly a very important factor. ”
The challenges of managing and developing the next generation of talent are also being considered for CEOs. Gen Z focuses on digital technology, work-life balance and remote work, but will soon make up half of the North American workforce, says Ted Bililies, global leader in transformative leadership for consultants at AlixPartners. “Many CEOs don't know how to handle it, or they turn it off by doing so,” he says. “They don't want to indulge in Gen Z.”
Reduces departure risk
These driving forces behind unwelcome deviations, coupled with the potential impact of a disruptive leadership transition, have encouraged some boards to take a more proactive approach to assessing and addressing the risk of CEOs leaving. “The board and compensation committees may have more open conversations with C-Suite executives to understand the challenges and opportunities they are looking for, and be more open about their ideas about their potential retirement than they did in the past.” “Through these conversations, boards and committees can be more planned about their choices, the concept of being proactive in contrast to reactive.” (SideBar, “Compling with Comp.”)
However, it is not always easy to foster open conversation amidst external market pressures and performance and governance concerns. In some cases, the CEO and the lead director or board chair with good chemistry can ask these questions and have a really candid conversation. “But it's probably more common that there are some constraints on those relationships,” Paese says. “This is a tricky thing the board should do because they ask the CEO to beat the security guards for a bit and say they're doing it. As one CEO told me, “You can almost become a human being, as a human being. You can't be completely human.”
The board may also need to look closely at its practices and examine whether the entire board is overreacting to external factors. Inadequately handled by the board or the entire board, attacks by active activist investors or massive stock price declines can abandon CEOboard relationships.
Paese said lack of trust or support from the board can take a significant consideration of CEO decisions. “Undoubtedly, one of the things that CEOs start marking their time on how long they will be at their job is when managing their board or board chair is a key issue,” he says. “It becomes an obstacle to peaceful work.”
Relentless pressure coupled with unrealistic goals can encourage CEOs to make changes. “The stress of the expectation and constant message from the board or customer is to do more with less,” agrees Dick Daniels, executive coach of the Chief Executive Group. “It hurts physically, mentally, emotionally, relationally and mentally.”
The board can try to strengthen the board-CEO relationship by identifying directors that CEOs can meet on a regular basis one-on-one basis, and possibly by identifying facilitators who will support those conversations. “Coach can ask the CEO and the board chair or lead director questions. “For example, 'The questions I have for both you, how aggressive do you think you're in this process? Should you do it next week? Next month?”
Bringing in CEO coaches who can help leaders navigate complex emotions and pressures encourages them to consider leaving prematurely. Whether drivers suffer from burnout, inconsistency with the board, organizational challenges, or external opportunities, coaches can guide CEOs and identify alternative solutions or approaches. “We're trying to understand whether they're expressing their inclinations to work with them to walk away and explore what's underneath,” says Scott Campbell, founder of original coaching and coach of the Chief Executive Group. “What are the drivers? They need to understand the underlying cause so that they can feel their way and perhaps take a different path.”
Succession factors
However, some transitions are inevitable, and it is a very strong succession plan, so Surface's potential CEO successors are equipped with the challenges faced by leaders today. This is another way for the board to reduce the risk of destructive departures. Identifying and developing internal candidates and regularly reviewing the company's leadership needs, taking into account both strategic goals and challenging external forces, minimizing the risk of new CEOs getting out of their way.
The demands of leaders today mean that boards must rethink how they identify, evaluate and develop potential successors. In addition to traditional strengths such as industry experience and financial insight, companies need technically fluent CEOs, allowing them to effectively engage with stakeholders and navigate economic and geopolitical uncertainties. “It involves more development, fostering more internal candidates and sharing more CEO responsibilities across different members of the C-Suite,” Paese said. “What this means is that it's very important to have a hierarchical and singular approach to CEOs as a place where all these important accountability exists in full. The best example of strong CEOs and board dynamics is where CEOs distribute accountability and responsibility with senior team members. Choice.”
Ultimately, the board that takes that level of future-view approach to CEO succession (prioritizing agility, innovation and resilience) is better positioned to ensure leadership continuity.
