Global findings 2015 CEO Success study April 2016 Briefing Document
Global findings
2015 CEO Success study
April 2016 Briefing Document
April 2016Strategy& | PwC
About the 2015 CEO Success study
Strategy&, PwC’s strategy consulting business, annual study of worldwide CEO
succession patterns examines the degree, nature, and geographic distribution of
chief executive changes among the world's 2,500 largest public companies.
The Rise of the Outsider CEO
Hiring an executive from outside a company to serve as chief executive officer
used to be seen as a last resort — something that typically happened when a
board of directors had to force out the incumbent CEO suddenly, or had failed to
groom a suitable successor, or both. Over the last several years, however, more
companies have deliberately chosen an outsider CEO, more often than not as
part of a planned succession. In this year’s report, we look at the data on
outsider CEOs and the circumstances in which outsiders are being hired. In
addition we have our annual analysis on CEO turnover, the 2015 incoming class
of CEOs, and women CEOs
1
April 2016Strategy& | PwC
Outsider CEO summary
Companies are now making a deliberate choice in their succession planning to bring in outsider CEOs. In the latest four-year period (2012–15 boards chose outsiders in 22 percent of planned turnovers, up from 14 percent in 2004–2007. That represents a 50 percent increase in the rate of outsider selection.
Industries experiencing the most disruption have brought in higher-than-average shares of outsider CEOs. These industries include telecommunications (38% incoming outsider CEOs from 2012 to 2015), utilities (32%), healthcare (29%), and energy (28%).
Outsider CEOs were more likely to be hired if the:
• Company was low performing
• Chairman did not have CEO experience in the same company
• Former CEO was also an outsider
Outsider CEOs were less likely to be hired if the:
• Chairman was hiring their first CEO at the company
• Former CEO had a long tenure
• Company was large
Outsider CEOs have closed the performance gap with insiders. For the third straight year, outsider CEOs have delivered higher median total shareholder returns than insiders.
Western European companies in general are hiring outsiders more reactively than proactively. Western European companies hire almost double the share of outsider CEOs compared with companies in the U.S./Canada. Additionally, outsider CEOs in Western Europe are significantly more likely to be appointed to low-performing companies and more likely to be forced out.
2
April 2016Strategy& | PwC
More outsider CEOs now come in via planned successions, showing that hiring an outsider is more of a deliberate choice than a necessity
Incoming outsider CEOs by turnover type
2004–2015
Note: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete information.
Source: Strategy& 2015 CEO Success study
3
43%
58%
74%
57%
42%
26%
2008–20112004–2007 2012–2015
Forced turnover
Planned turnover
April 2016Strategy& | PwC
Outsiders now account for more than a fifth of all CEOs hired via planned turnovers
Incoming CEOs via forced turnover
by insider/outsider pedigree
2004–2015
Note: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete information.
Source: Strategy& 2015 CEO Success study
4
Incoming CEOs via planned turnover
by insider/outsider pedigree
2004–2015
32% 33% 35%
68% 67% 65%
2004–2007 2008–2011 2012–2015
14% 17% 22%
86% 83% 78%
2012–20152008–20112004–2007
Incoming insider CEO
Incoming outsider CEO
April 2016Strategy& | PwC
Western European companies hire outsider CEOs almost twice as frequently as companies in the U.S./Canada
Percentage of incoming outsider CEOs by region
2004–2015
1) "Other Mature" economies include Argentina, Australia, Bahrain, Chile, Czech Republic, Hong Kong, Hungary, New Zealand, Poland, Korea.
2) “Other Emerging" economies include Egypt, Kazakhstan, Mexico, Nigeria, South Africa, Turkey, Vietnam.
Note 1: "Mature" countries are defined as per the U.N. Development Programme 2015 ranking of countries with "very high human development" (human development index >0.80);
all others are "emerging“ countries.
Note 2: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete information.
Source: Strategy& 2015 CEO Success study
5
21%
35%
30%
21%
2%
20%
26%25%
21%
17%
30%30%
36%
24%
3%
China
14%14%
U.S./Canada
18%
Other Emerging2)Western Europe
32%
27%
Other Mature1)
23%
Brazil,
Russia, India
38%
9%
Global Japan
4%
2012–20152008–20112004–2007
April 2016Strategy& | PwC
Industries experiencing the most disruption have brought in higher-than-average shares of outsider CEOs
Percentage of incoming outsider CEOs by industry
2004–2015
6
1) "Consumer Discretionary" includes automobiles and components, consumer durables and apparel, consumer services, media, and retailing.
Note: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete information.
Source: Strategy& 2015 CEO Success study
20%21%
24%
15%17%
21%20%
25%
29%
21% 21%
25%
15%
26%24%
22%
15%
19%21%
26%26%
32%
24%
28%
21% 23%
Cross
Industry
Utilities
19%
Telecommunication
Services
Healthcare Energy
38%
29%
18%
IndustrialsConsumer
Staples
15%
Materials
19%
Consumer
Discretionary
Information
Technology
23%
Financial
Services
2012–20152004–2007 2008–2011
April 2016Strategy& | PwC
Low-performing companies were more likely to hire outsider CEOs than high-performing companies, except in forced turnovers
Percentage of incoming outsider CEOs by company performance and turnover type
2004–2015
1) Low-performing companies are defined as companies whose annualized regionally adjusted total shareholder returns were in the bottom quartile over their outgoing CEO's
tenure. High-performing companies are defined as companies whose annualized regionally adjusted total shareholder returns were in the top quartile over their outgoing CEO's
tenure.
Note: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete information.
Source: Strategy& 2015 CEO Success study
26%
30%
18%
22%
38%
Planned turnoversForced turnovers
36%
Forced and planned turnovers
High-performing companiesLow-performing companies1)
High-performing companies were more likely
to hire outsider CEOs in forced turnovers
because those forced turnovers were most
often due to board/shareholder struggles or
ethical lapses.
7
April 2016Strategy& | PwC
Low-performing Western European companies were much more likely to hire an outsider CEO in forced turnover situations than companies in the U.S./Canada
Percentage of incoming outsider CEOs by company performance and turnover type
2004–2015
1) Low-performing companies are defined as companies whose annualized regionally adjusted total shareholder returns were in the bottom quartile over their outgoing CEO's
tenure. High-performing companies are defined as companies whose annualized regionally adjusted total shareholder returns were in the top quartile over their outgoing
CEO's tenure.
2) “BRIC/Other Emerging" economies include Brazil, Russia, India, China, Egypt, Kazakhstan, Mexico, Nigeria, South Africa, Turkey, Vietnam.
Note 1: "Mature" countries are defined as per the U.N. Development Programme 2015 ranking of countries with "very high human development" (human development index >0.80);
all others are "emerging“ countries.
Note 2: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete information.
Source: Strategy& 2015 CEO Success study
8
31%30%
20%
Western
Europe
32%
42%
Global
22%
32%
18%
BRIC/Other
Emerging2)
U.S./Canada
Low-performing companies1) High-performing companies
29%
25%26%26%
18%
Global
27%
Western
Europe
U.S./Canada
13%
33%
BRIC/Other
Emerging
40%
34%
51%
36%
55%
BRIC/Other
Emerging
26%
Western
Europe
Global
38%
U.S./Canada
47%
Forced and planned turnovers Planned turnovers Forced turnovers
April 2016Strategy& | PwC
Outsider CEOs were more likely to be hired if the chairman did not have CEO experience in the same company or if the former CEO was also an outsider
Incoming CEO pedigree by outgoing
CEO pedigree
2004–2015
Note: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete information.
Source: Strategy& 2015 CEO Success study
9
Incoming CEO pedigree by chairman
pedigree
2009–2015
36%18%
64%82%
Outgoing outsider CEOOutgoing insider CEO
28%
84%72%
16%
Chairman did not have
previous CEO experience
in the same company
Chairman had previous
CEO experience in the
same company
Incoming outsider CEO
Incoming insider CEO
If the chairman did not have
CEO experience in the same
company, an outsider was
hired 28% of the time.
If the outgoing CEO was also
an outsider, 36% of the time
they were replaced with
another outsider CEO.
April 2016Strategy& | PwC
Chairmen who are hiring their first CEO at the company are less likely to appoint an outsider CEO unless the former CEO was also an outsider
Percentage of incoming outsider CEOs by whether it was the chairman’s first CEO
appointment at the company and former CEO pedigree
2009–2015
Note: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete information.
Source: Strategy& 2015 CEO Success study
10
15%
20%
26%27%26%
Outgoing outsider CEO
38%
Outgoing insider CEOOutgoing insider or outsider CEO
Chairman’s first CEO appointment at the company Not chairman’s first CEO appointment at the company
New chairmen are more likely to stick with
the pedigree of the former CEO while
experienced chairmen seem to ignore the
pedigree of the former CEO. They choose
perhaps more rationally as they know the
company and its leaders better.
April 2016Strategy& | PwC
The longer the tenure of the former CEO, the less likely an outsider CEO was to be hired
Incoming CEO pedigree by tenure of former CEO
2004–2015
Note: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete information.
Source: Strategy& 2015 CEO Success study
11
28%21% 17%
72%83%79%
0-4 years 4-8 years 8+ years
Incoming insider CEO
Incoming outsider CEO
An outsider CEO was hired 28%
of the time if the former CEO
had a tenure of 0-4 years.
April 2016Strategy& | PwC
The larger the company, the less likely it was to hire an outsider CEO
Incoming CEO pedigree by market
cap quartile
2004–2015
12
Incoming CEO pedigree by # of
employees quartile
2009–2015
1) Market cap quartile was based on company ranking in world’s 2,500 largest. Companies ranked 1,876–2,500 were in the smallest quartile. Companies ranked 1–625 were in the
largest quartile. Largest market cap quartile companies had a market cap value in 2015 of more than US$19.7 billion.
2) Smallest employee quartile companies had 12–6,109 employees. Companies in the largest employee quartile had 41,278–2,200,000 employees.
Note: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete information.
Source: Strategy& 2015 CEO Success study
28% 28% 25%16%
72% 72% 75%84%
Second
market cap
quartile
Largest
market cap
quartile
Third market
cap quartile
Smallest
market cap
quartile1)
30% 25% 21% 17%
70% 75% 79% 83%
Third
employee
quartile
Second
employee
quartile
Smallest
employee
quartile2)
Largest
employee
quartile
Incoming insider CEO
Incoming outsider CEO
April 2016Strategy& | PwC
More recently, companies have been hiring outsider CEOs with more industry and CEO experience
Incoming outsider CEO from same or
different prior industry1) compared with
current company industry, 2004–2015
13
Incoming outsider CEO with prior public
CEO experience
2009–2015
1) Exhibit shows incoming CEOs who joined their company as CEO, broken down by whether they had worked in the same or a different industry immediately before joining the
current company.
Note: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete information.
Source: Strategy& 2015 CEO Success study
57%63%
70%65%
43%37%
30% 35%
2012 2013 2014 2015
26% 29%23%
37%29%
35%41%
74% 71%77%
63%71%
65%59%
2014 2015201320122009 20112010
Same industry
Different industry
Has public CEO experience
No public CEO experience
April 2016Strategy& | PwC
In 2015, in the largest companies, 60% of incoming outsider CEOs had previous public CEO experience
14
1) Market cap quartile was based on company ranking in world’s 2,500 largest. Companies ranked 1,876–2,500 were in the smallest quartile. Companies ranked 1–625 were in the
largest quartile. Largest market cap quartile companies had a market cap value in 2015 of more than US$19.7 billion.
Note: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete information.
Source: Strategy& 2015 CEO Success study
30% 30%
50%60%
70% 70%
50%40%
Largest market cap quartileThird market cap quartileSmallest market cap quartile Second market cap quartile
Has public CEO experience
No public CEO experience
Incoming outsider CEO prior public CEO experience by market cap quartile
2015
April 2016Strategy& | PwC
Outsider CEOs were more likely than insiders both to have international experience and be of different nationality than their company HQ region
Incoming CEO experience1) in different
regions compared to company HQ region
2012–2015
15
Incoming CEO nationality compared with
company HQ region
2009–2015
1) “Experience in different regions” means incoming CEOs’ experience in regions other than company HQ region.
Note: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete information.
Source: Strategy& 2015 CEO Success study
32%46%
68%54%
Incoming outsider CEOIncoming insider CEO
86%73%
17%
10%
10%
Incoming outsider CEOIncoming insider CEO
5%
Has not worked in other regions
Has worked in other regions
Different country, different region
Different country, same region
Same
April 2016Strategy& | PwC
The financials industry hired almost all its outsider CEOs from its own industry
Incoming outsider CEO from same or different prior industry1) compared to current
company industry
2004–2015
1) Exhibit shows incoming CEOs who joined their company as CEO, broken down by whether they had worked in the same or different industry immediately before joining the
current company.
2) "Consumer Discretionary" includes automobiles and components, consumer durables and apparel, consumer services, media, and retailing.
Note: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete information.
Source: Strategy& 2015 CEO Success study
63%
92%
77% 75%70%
64%58% 56%
44% 41%
28%
37%
8%
23% 25% 30%36%
42% 44%
56% 59%
72%
Cross Industry UtilitiesConsumer
Discretionary2)
IndustrialsMaterialsInformation
Technology
Consumer
Staples
EnergyHealthcareTelecommunication
Services
Financial
Services
Same prior industry
Different prior industry
16
April 2016Strategy& | PwC
Historically, outsider CEOs were much more likely to be forced out than insiders, but the difference has narrowed
Outgoing outsider CEOs by turnover type
2004–2015
17
Outgoing insider CEOs by turnover type
2004–2015
49% 52%64%
39% 32%21%
12% 16% 14%
2008–20112004–2007 2012–2015
59%66%
73%
31% 21%16%
10% 13% 11%
2008–2011 2012–20152004–2007
Note: Exhibit excludes turnover events with incomplete information.
Source: Strategy& 2015 CEO Success study
Planned turnover
Forced turnover
Merger and acquisition
April 2016Strategy& | PwC
Outgoing outsider CEOs have had longer median tenures than insider CEOs over the last two years
18
Note: Exhibit excludes turnover events with incomplete information.
Source: Strategy& 2015 CEO Success study
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
0.0
4.0
5.0
4.5
5.5
6.0
Years6.0
5.0
5.8
5.3
5.05.0
4.0
4.8
5.6
4.7
3.5
5.05.2
4.8
3.7
4.6
5.2
5.9
5.1
5.2
4.8
5.8
4.0
4.8
Outgoing outsider CEO
Outgoing insider CEO
Outgoing CEO median tenure by pedigree
2004–2015
April 2016Strategy& | PwC
For the third straight year, outsider CEOs have delivered higher median total shareholder returns than insiders
19
1) Total shareholder returns are annualized over outgoing CEOs' tenure and are regionally adjusted, meaning that performance is measured relative to a regional index (S&P 500,
Brazil Bovespa, FTSE 100, CAC 40, etc.).
Note: Exhibit excludes turnover events with incomplete information.
Source: Strategy& 2015 CEO Success study
Median total shareholder returns1) by outgoing CEO pedigree
2000–2015
3.9%
2.9%
4.6%3.9%
4.1%
-1.2%
0.7%
3.9%
11.0%
-3%
2%
3%
0%
1%
-1%
6%
-4%
-2%
-5%
5%
7%
9%
8%
4%
11%
10%
-4.6%
2000 2003 2007
1.5%
2005
-0.6%
2006 2008
4.0%
0.1%
2009
5.6%
0.9%
2001
-0.3%
2012
4.6%
0.1%
2014
4.6%
3.2%
0.6%
2015
3.7%
4.6%
-3.0%
2.2%
2013
2.6%
2010
2.4%
2004
0.5%
Regionally adjusted
annualized TSR
3.1%4.1%
2002
0.3%
2011
Outgoing outsider CEO
Outgoing insider CEO
One reason we believe outsiders are performing better is that the
outgoing CEOs over the last three years include a higher number
who were hired in planned rather than forced turnovers, and fewer
of them were themselves forced out. Historically, most outsiders
had been hired following forced successions, more often than not
in situations where the company had not been performing well.
April 2016Strategy& | PwC
Most recently, outsider CEOs in Western Europe have been significantly more likely to be forced out than outsiders in any other region
20
1) “Other Emerging" economies include Egypt, Kazakhstan, Mexico, Nigeria, South Africa, Turkey, Vietnam.
2) "Other Mature" economies include Argentina, Australia, Bahrain, Chile, Czech Republic, Hong Kong, Hungary, New Zealand, Poland, Korea.
*Sample size in Japan and China not significant for all 12 years. Sample size in Brazil, Russia, India not significant from 2004–2007.
Note 1: "Mature" countries are defined as per the U.N. Development Programme 2015 ranking of countries with "very high human development" (human development index >0.80);
all others are "emerging“ countries.
Note 2: Exhibit excludes turnover events with incomplete information.
Source: Strategy& 2015 CEO Success study
Percentage of outgoing outsider CEOs via forced turnovers by region
2004–2015
25%
54%
41%39%
22%
0%
20%
41%40%
32%
5%
14%
19%20%
43%
21%
37%
Other Emerging1)
38%
47%
Global Western Europe Other Mature2)
67%
China*
7%
Brazil,
Russia, India*
36%
Japan*
17%18%
U.S./Canada
2012–20152004–2007 2008–2011
April 2016Strategy& | PwC
Outsider CEOs in Western Europe consistently perform worse than those in the U.S./Canada
21
1) Total shareholder returns are annualized over outgoing CEOs' tenure and are regionally adjusted, meaning that performance is measured relative to a regional index (S&P 500,
Brazil Bovespa, FTSE 100, CAC 40, etc.).
Note: Exhibit excludes turnover events with incomplete information.
Source: Strategy& 2015 CEO Success study
Outgoing outsider CEO by quartile of annualized shareholder returns1)
2004–2015
14%
29%20%
26%
14%21%
27%28% 30%
34% 29% 30%
50%
2012–20152008–20112004–2007
Lowest TSR Quartile
Second TSR Quartile
Third TSR Quartile
Highest TSR Quartile
18%27% 33%
24%
33% 24%
32%
23%16%
26%17%
28%
50%
2012–20152008–20112004–2007
U.S./Canada Western Europe
In the last four years, 60% of outgoing
outsider CEOs in the U.S./Canada have been
in the two highest TSR quartiles compared to
only 44% of outgoing outsider CEOs in
Western Europe. Outsider CEOs in Western
Europe are more likely to be appointed to low-
performing companies and more likely to be
forced out than outsiders in the U.S./Canada.
April 2016Strategy& | PwC
CEO turnover summary
In 2015, the total CEO turnover rate at the world’s 2,500 largest companies was 16.6%, a study record high. 17% of all CEO turnovers in 2015 were due to M&A, the highest since 2007.
Brazil, Russia, and India (BRI) lead the world again in CEO turnovers while Japan and Western Europe reached five year highs.
– In four out of the last five years, BRI has had the highest CEO turnover rate.
– Japan went from the lowest CEO turnover rate in 2014 (12%) to the second highest in 2015 (19%) Western Europe went from 14% in 2014 to 18% in 2015.
Telecommunication services has the highest CEO turnover rate for the fifth straight year; five other industries led by energy and materials reached five year highs.
– With the falling price of oil and other commodities, CEO turnover jumped in the following industries:
• Energy: 18% in 2014 to 23% in 2015
• Materials: 17% to 20%
• Utilities: 13% to 17%
• Financial services: 13% to 16%
22
April 2016Strategy& | PwC
In 2015, the total CEO turnover rate of the world’s 2,500 largest public companies was 16.6%, a study record high
23
Note: Exhibit excludes turnover events with incomplete information.
Source: Strategy& 2015 CEO Success study
CEO turnover rate by succession reason
CEO turnover events as a percentage of top 2,500 public companies
7.7%
9.1%
7.2%
9.2% 9.8%
6.3%
10.9%
11.2%10.1%
10.8%
6.7%7.8%
5.3%5.0%6.0%6.4%
3.4%3.6%
4.5%
3.2%
1.9%
4.2%
3.0%
2.6%
2.8%
2.2%
2.2%
5.1%
4.6%
4.4%2.4%
3.4%
1.8%
3.4%
1.4%
1.8%
2.4%
2.9%
1.2%1.5%2.2%2.2%
2.6%
1.4%
3.2%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
16%
17%
2003
11.6%
(290)
2008
14.3%
(359)
14.4%
(361)
16.6%
(416)
2015
1.3%
9.8%
(244)
2000
10.9%
(272)
2012 20132004
14.3%
(357)
2014
2.8%14.2%
(355)
2001
10.8%
(270)
2002
12.9%
(323)
2007
13.8%
(345)
14.4%
(359)
15.4%
(386)
2.4%
14.7%
(367)
2005 2009
14.2%
(354)
15.0%
(375)
201120102006
Turnover rate
Planned turnover
M&A
Forced turnover
April 2016Strategy& | PwC
In 2015, 17% of all CEO turnovers were due to M&A, the highest since 2007
24
Note: Exhibit excludes turnover events with incomplete information.
Source: Strategy& 2015 CEO Success study
CEO succession reasons as a percentage of turnover events
2000–2015
49%56%
46%54% 53%
60%
44% 48% 50%
64% 66% 69% 72% 71%78%
65%
26%22% 41%
32% 31%23%
32%30%
35%
24% 19% 15%18% 19%
13%
18%
25% 22%13% 14% 17% 17%
24% 21%15% 13% 15% 16%
10% 10% 9%17%
2011 2015200520042003 2009 2012200220012000 20142006 2008 20102007 2013
Forced turnover
M&A
Planned turnover
April 2016Strategy& | PwC
Brazil, Russia, and India had the highest rate of CEO turnovers followed by Japan and Western Europe
25
1) "Other Mature" economies include Argentina, Australia, Bahrain, Chile, Czech Republic, Hong Kong, Hungary, New Zealand, Poland, Korea.
2) “Other Emerging" economies include Egypt, Kazakhstan, Mexico, Nigeria, South Africa, Turkey, Vietnam.
Note 1: "Mature" countries are defined as per the U.N. Development Programme 2015 ranking of countries with "very high human development" (human development index >0.80);
all others are "emerging“ countries.
Note 2: Exhibit excludes turnover events with incomplete information.
Source: Strategy& 2015 CEO Success study
CEO turnover rate by region and succession reason
2015 CEO turnover events as a percentage of top 2,500 public companies in each region
10.9%
17.3% 18.4%
10.3% 11.7% 13.1%10.7%
7.7%
3.0%
3.1%
5.2% 3.2% 3.1%
3.1%
2.4%
4.4%2.5%2.8% 1.0%
23.6%
(30)
1.0%
Brazil,
Russia, India
Global
16.6%
(416)
2.3%
16.7%
(33)
19.4%
(40)
Other Mature1)
2.2%
Western Europe
16.9%
(58)16.1%
(42)
17.9%
(90)
ChinaJapan
2.0%
Other Emerging2)
14.3%
(123)
U.S./Canada
Planned turnover
M&A
Forced turnover
Region Brazil,
Russia,
India
China Japan Other
emerging
Other
mature
U.S./
Canada
Western
Europe
Total
Number of companies in region 127 261 206 198 343 861 504 2500
April 2016Strategy& | PwC
Japan went from the lowest CEO turnover rate in 2014 to the second highest in 2015
26
1) "Other Mature" economies include Argentina, Australia, Bahrain, Chile, Czech Republic, Hong Kong, Hungary, New Zealand, Poland, Korea.
2) “Other Emerging" economies include Egypt, Kazakhstan, Mexico, Nigeria, South Africa, Turkey, Vietnam.
Note 1: "Mature" countries are defined as per the U.N. Development Programme 2015 ranking of countries with "very high human development" (human development index >0.80);
all others are "emerging“ countries.
Note 2: Exhibit excludes turnover events with incomplete information.
Source: Strategy& 2015 CEO Success study
CEO turnover rate by region
2010–2015 CEO turnover events as a percentage of top 2,500 public companies in each region
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
22%
24%
2010 2011 2012 2013 2014 2015
Turnover rate
Other Mature1)
Japan
China
Brazil, Russia, India
Other Emerging2)
U.S./Canada
Western Europe
April 2016Strategy& | PwC
The telecommunication services industry had the highest CEO turnover rate followed by energy and materials
27
1) "Consumer Discretionary" includes automobiles and components, consumer durables and apparel, consumer services, media, and retailing.
Note: Exhibit excludes turnover events with incomplete information.
Source: Strategy& 2015 CEO Success study
CEO turnover rate by industry and succession reason
2015 CEO turnover events as a percentage of top 2,500 public companies in each industry
Industry Consumer
discretionary
Consumer
staples
Energy Financial
services
Health
care
Industrials Information
technology
Materials Telecommunication
services
Utilities Total
Number of companies in
industry348 208 181 537 171 380 219 224 93 139 2500
10.9%
16.1%13.8% 13.8%
11.6%13.7%
9.6% 10.6% 10.1%
5.8%7.3%
3.0%
6.5%
6.6%
2.7%
2.9%2.2%
3.4%3.4%
2.6%
2.8%
2.2%
2.8%
3.1%
2.4%3.4% 2.2%
3.2%
5.8% 2.3%
0.7%
16.6%
(416)
19.6%
(44)
MaterialsEnergy
23.2%
(42)
24.7%
(23)
Telecommunication
Services
15.8%
(55)
0.6%
12.3%
(21)
16.2%
(87)
Financial
Services
0.9%
Consumer
Staples
Consumer
Discretionary
Healthcare
10.5%
(23)
Information
Technology
Utilities
16.3%
(34)
16.8%
(64)16.5%
(23)
Industrials
Planned
M&A
Forced
Cross
Industry
April 2016Strategy& | PwC
Six industries led by telecommunication services, energy, and materials all reached five year high CEO turnover rates
28
1) "Consumer Discretionary" includes automobiles and components, consumer durables and apparel, consumer services, media, and retailing.
Note: Exhibit excludes turnover events with incomplete information.
Source: Strategy& 2015 CEO Success study
CEO turnover rate by industry
2010–2015 CEO turnover events as a percentage of top 2,500 public companies in each industry
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2010 2011 2012 2013 2014 2015
Turnover rate
Consumer Discretionary1)
Information Technology
Consumer Staples
Financial Services
Industrials
Materials
Telecommunications Services
Utilities
Energy
Healthcare
April 2016Strategy& | PwC
2015 incoming class of CEOs summary
In the 2015 incoming class of CEOs, new CEOs in Western Europe compared to the U.S./Canada were more likely to:
– Be outsiders (38% vs. 14%)
– Be of foreign nationality (30% vs. 15%)
– Have worked internationally (41% vs. 30%)
They were less likely to:
– Spend their entire career at one company (9% to 16%)
– Have an MBA (26% to 41%)
The global CEO is a myth. International work experience is decreasing, down to 28% in 2015.
Loyalty high in Japan and China. Three quarters of incoming CEOs in Japan and nearly one half in China spent their entire career at one company.
Tech CEOs skip business school. Only 13% of incoming CEOs in the information technology industry had an MBA compared to 44% in the consumer staples industry.
Good governance on the rise. Only 7% of incoming CEOs also held the position of chairman, a study record low.
29
April 2016Strategy& | PwC
In 2015, Western Europe hired more than double the share of outsider CEOs than the U.S./Canada
30
1) "Other Mature" economies include Argentina, Australia, Bahrain, Chile, Czech Republic, Hong Kong, Hungary, New Zealand, Poland, Korea.
2) “Other Emerging" economies include Egypt, Kazakhstan, Mexico, Nigeria, South Africa, Turkey, Vietnam.
Note 1: "Mature" countries are defined as per the U.N. Development Programme 2015 ranking of countries with "very high human development" (human development index >0.80);
all others are "emerging“ countries.
Note 2: Exhibit excludes turnover events resulting from M&A, interims, and events with incomplete information
Source: Strategy& 2015 CEO Success study
Incoming CEO pedigree by region
2015
23%
38% 35% 33%25%
16% 14%
77%
62% 65% 67%75%
84% 86%97%
JapanBrazil,
Russia, India
ChinaOther Emerging2)Western Europe Other Mature1)
3%
U.S./CanadaGlobal
Incoming insider CEO
Incoming outsider CEO
April 2016Strategy& | PwC
Half of the incoming CEOs in the telecommunication services industry were outsiders
31
1) "Consumer Discretionary" includes automobiles and components, consumer durables and apparel, consumer services, media, and retailing.
Note: Exhibit excludes turnover events resulting from M&A and interims and events with incomplete information.
Source: Strategy& 2015 CEO Success study
Incoming CEO pedigree by industry
2015
23%
50%
32% 31% 27% 27% 23% 18% 15% 14%
77%
50%
68% 69% 73% 73% 77% 82% 85% 86%94%
6%
Consumer
Staples
Materials Consumer
Discretionary1)
Cross
Industry
Financial
Services
IndustrialsHealthcare Information
Technology
EnergyUtilities
Incoming outsider CEO
Incoming insider CEO
Telecommuni-
cation
Services
April 2016Strategy& | PwC
The median age for an incoming CEO was 53 with CEOs in Japan being the oldest (median age of 60)
32
1) "Other Mature" economies include Argentina, Australia, Bahrain, Chile, Czech Republic, Hong Kong, Hungary, New Zealand, Poland, Korea.
2) “Other Emerging" economies include Egypt, Kazakhstan, Mexico, Nigeria, South Africa, Turkey, Vietnam.
Note 1: "Mature" countries are defined as per the U.N. Development Programme 2015 ranking of countries with "very high human development" (human development index >0.80);
all others are "emerging“ countries.
Note 2: Exhibit excludes turnover events resulting from M&A and interims and events with incomplete information.
Source: Strategy& 2015 CEO Success study
Incoming CEO median age by region
2015
Global median
age in 2014
was 52.
5051515253
55
60
53
U.S./CanadaWestern Europe China Other Emerging2)Brazil,
Russia, India
Global Other Mature1)Japan
April 2016Strategy& | PwC
Companies in Western Europe were most likely to hire a foreign CEO
33
1) “Other Emerging" economies include Egypt, Kazakhstan, Mexico, Nigeria, South Africa, Turkey, Vietnam.
2) "Other Mature" economies include Argentina, Australia, Bahrain, Chile, Czech Republic, Hong Kong, Hungary, New Zealand, Poland, Korea.
Note 1: "Mature" countries are defined as per the U.N. Development Programme 2015 ranking of countries with "very high human development" (human development index >0.80);
all others are "emerging“ countries.
Note 2: Exhibit excludes turnover events resulting from M&A and interims and events with incomplete information.
Source: Strategy& 2015 CEO Success study
Incoming CEO nationality compared with company headquarters region
2015
83%
97% 94% 90%84% 82% 78%
70%
12% 6% 10% 14% 14%20%
11%
19%5%
2%
ChinaJapan
5%
Global
3%
Other Mature2) Western Europe
1%
U.S./Canada Other Emerging1)Brazil,
Russia, India
Different country, same region
Same
Different country, different region
April 2016Strategy& | PwC
The global CEO is a myth. International work experience is decreasing, down to 28% in 2015
34
1)“Experience in different regions” means incoming CEOs’ experience in regions other than company HQ region.
Note: Exhibit excludes turnover events resulting from M&A and interims and events with incomplete information.
Source: Strategy& 2015 CEO Success study
Incoming CEOs with experience1) in different regions compared to company HQ region
2015
45%35% 34% 28%
55%65% 66% 72%
20132012 20152014
Has worked in other regions
Has not worked in other regions
April 2016Strategy& | PwC
Incoming CEOs in Western European were most likely to have international work experience
35
1) “Experience in different regions” means incoming CEOs’ experience in regions other than company HQ region.
2) "Other Mature" economies include Argentina, Australia, Bahrain, Chile, Czech Republic, Hong Kong, Hungary, New Zealand, Poland, Korea..
3) “Other Emerging" economies include Egypt, Kazakhstan, Mexico, Nigeria, South Africa, Turkey, Vietnam.
Note 1: "Mature" countries are defined as per the U.N. Development Programme 2015 ranking of countries with "very high human development" (human development index >0.80);
all others are "emerging“ countries.
Note 2: Exhibit excludes turnover events resulting from M&A and interims and events with incomplete information.
Source: Strategy& 2015 CEO Success study
Incoming CEOs with experience1) in different regions compared to company HQ region
2015
28%41% 38%
30% 26%18% 14%
72%59% 62%
70% 74%82% 86%
97%
Brazil,
Russia, India
JapanGlobal China
3%
Western Europe Other Mature2) U.S./Canada Other Emerging3)
Has not worked in other regions
Has worked in other regions
April 2016Strategy& | PwC
More than a quarter of incoming CEOs spent their entire career at one company…
36
1) "Previous experience in different companies" means new CEO had worked at another company at any time before being named CEO at current company.
Note: Exhibit excludes turnover events resulting from M&A and interims and events with incomplete information.
Source: Strategy& 2015 CEO Success study
Incoming CEOs with previous experience1) in different companies
2015
20% 22% 20%26%
80% 78% 80%74%
20132012 20152014
Has not previously worked in other companies
Has previously worked in other companies
April 2016Strategy& | PwC
…a result of the high CEO turnover in Japan where three quarters of incoming CEOs spent their entire career at one company
37
1) "Previous experience in different companies" means new CEO had worked at another company at any time before being named CEO at current company.
Note: Exhibit excludes turnover events resulting from M&A and interims
2) "Other Mature" economies include Argentina, Australia, Bahrain, Chile, Czech Republic, Hong Kong, Hungary, New Zealand, Poland, Korea.
3) “Other Emerging" economies include Egypt, Kazakhstan, Mexico, Nigeria, South Africa, Turkey, Vietnam.
Note 1: "Mature" countries are defined as per the U.N. Development Programme 2015 ranking of countries with "very high human development" (human development index >0.80);
all others are "emerging“ countries.
Note 2: Exhibit excludes turnover events resulting from M&A and interims and events with incomplete information.
Source: Strategy& 2015 CEO Success study
Incoming CEOs with previous experience1) in different companies by region
2015
26%
76%
46%
29%21% 16% 13%
74%
24%
54%
71%79%
84% 87% 91%
9%
Global ChinaJapan Western EuropeOther Emerging3)Other Mature 2) U.S./CanadaBrazil,
Russia, India
Has previously worked in other companies
Has not previously worked in other companies
April 2016Strategy& | PwC
A third of incoming CEOs had an MBA and a tenth had a PhD
38
Note: Exhibit excludes turnover events resulting from M&A and interims and events with incomplete information.
Source: Strategy& 2015 CEO Success study
Incoming CEOs with and without selected degrees
2015
99%
30%
9%
70%
91%
MBA PhDUndergraduate
1%
No Yes
April 2016Strategy& | PwC
CEOs in the U.S./Canada were most likely to have an MBA
39
1) "Other Mature" economies include Argentina, Australia, Bahrain, Chile, Czech Republic, Hong Kong, Hungary, New Zealand, Poland, South Korea, etc.
2) “Other Emerging" economies include Egypt, Kazakhstan, Mexico, Nigeria, South Africa, Turkey, Vietnam etc.
Note 1: "Mature" countries are defined as per the U.N. Development Programme 2015 ranking of countries with "very high human development" (human development index >0.80);
all others are "emerging“ countries.
Note 2: Exhibit excludes turnover events resulting from M&A and interims and events with incomplete information.
Source: Strategy& 2015 CEO Success study
Incoming CEOs with an MBA by region
2015
30%41%
35% 33% 32%26% 25%
70%59% 65% 67% 68% 74% 75%
97%
3%
U.S./Canada Other Mature1)Global JapanBrazil,
Russia, India
ChinaOther Emerging2) Western Europe
No MBA
Yes MBA
April 2016Strategy& | PwC
CEOs in the information technology industry were least likely to have an MBA
40
1) "Consumer Discretionary" includes automobiles and components, consumer durables and apparel, consumer services, media, and retailing.
Note: Exhibit excludes turnover events resulting from M&A and interims and events with incomplete information.
Source: Strategy& 2015 CEO Success study
Incoming CEOs with an MBA by industry
2015
30%44%
38% 35% 33% 31% 29% 27% 26%18%
13%
70%
56%63% 65% 67% 69% 71% 73% 74%
82% 88%
Cross
industry
Consumer
staples
Consumer
discretionary1)
Utilities Information
technology
Telecom
services
Health careFinancialsIndustrialsEnergy Materials
Yes MBA
No MBA
April 2016Strategy& | PwC
Only 7% of incoming CEOs also held the position of chairman, a record low
41
Note: Exhibit excludes turnover events resulting from M&A and interims and events with incomplete information.
Source: Strategy& 2015 CEO Success study
Percentage of incoming CEOs who hold the joint title of CEO and chairman
2000–2015
9%
29%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
55%
60%
65%
10%7%
14%
2011 20152012
Joint title share
2014
33%
19% 18%
2003 2004
13%
48%
2001 20092007
33%
2006 2010
26%
20022000 2005
33%
2008
12%
2013
12%
31%
Japan
Europe
North America China & Rest of Asia
Global Average
April 2016Strategy& | PwC
Women CEOs summary
Women CEOs take a step back. The share of incoming women CEOs fell to 2.8%, the lowest percentage since 2011. Just 10 of 359 incoming CEOs (permanent and interim) in the class of 2015 were women.
Women CEOs in the U.S./Canada slide to the bottom. The share of incoming women CEOs in the U.S./Canada fell for the third year to the lowest in the study’s history. There was just 1 woman of the total 87 (1.1%) incoming CEOs in the U.S./Canada.
Women CEOs are more often hired from outside the company than men CEOs are. 32% of incoming and outgoing women CEOs were outsiders compared to just 23% of men.
There is improvement. As of 2015, it is no longer statistically significant that women CEOs are more often forced out of office than men. Over the last 12 years, 32% of women CEOs have been forced out of office compared to 25% of men.
42
April 2016Strategy& | PwC
In 2015, the share of incoming women CEOs fell to 2.8%, the lowest since 2011
43
Note: Exhibit includes turnover events resulting from M&A and interims and excludes events with incomplete information.
Source: Strategy& 2015 CEO Success study
Share of incoming women CEOs
2004–2015
5.2%
4.3%4.0%
3.5%3.4%
2.4%
0%
1%
2%
3%
4%
5%
6%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
1.0%1.1%
2.6%
3.0%2.8%
2.1%
Incoming women CEOs
April 2016Strategy& | PwC 44
Note: Exhibit includes turnover events resulting from M&A and interims and excludes events with incomplete information.
Source: Strategy& 2015 CEO Success study
4.0%
7.3%7.1%
5.2%
0%
1%
2%
3%
4%
5%
6%
7%
8%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
6.2%
4.8%
2.7%
1.9%
4.7%
1.1%
2.0%2.4%
Incoming women CEOs
While the share of incoming women CEOs in the U.S./Canada fell for the third year to the lowest in the study’s history
Share of incoming women CEOs in the U.S./Canada
2004–2015
April 2016Strategy& | PwC
However, over the last 12 years, the U.S./Canada has hired the largest share of women CEOs
45
1) "Other Mature" economies include Argentina, Australia, Bahrain, Chile, Czech Republic, Hong Kong, Hungary, New Zealand, Poland, Korea.
2) “Other Emerging" economies include Egypt, Kazakhstan, Mexico, Nigeria, South Africa, Turkey, Vietnam.
Note: "Mature" countries are defined as per the U.N. Development Programme 2015 ranking of countries with "very high human development" (human development index >0.80);
all others are "emerging“ countries.
Note: Exhibit includes turnover events resulting from M&A and interims and excludes events with incomplete information.
Source: Strategy& 2015 CEO Success study
Percentage of incoming women CEOs by region
2004–2015
2.3%
3.1%
4.0%
3.0%
1.9%
0.9%
Other Emerging2) JapanBrazil,
Russia, India
Global
3.8%
ChinaOther Mature1) Western EuropeU.S./Canada
3.7%
Women CEOs
April 2016Strategy& | PwC
The consumer discretionary industry has hired the largest share of women CEOs
46
1) "Consumer Discretionary" includes automobiles and components, consumer durables and apparel, consumer services, media, and retailing.
Note: Exhibit includes turnover events resulting from M&A and interims and excludes events with incomplete information.
Source: Strategy& 2015 CEO Success study
Percentage of incoming women CEOs by industry
2004–2015
1.0%
1.5%
3.0%3.3%
3.6%
4.5%
4.9%
3.0%
4.7%
Financial
Services
Consumer
Discretionary1)
1.6%
Cross
Industry
Information
Technology
Utilities HealthcareConsumer
Staples
Energy Materials
1.6%
Industrials
Women CEOs
Telecommuni-
cation
Services
April 2016Strategy& | PwC
In the U.S./Canada, the financials industry has hired the smallest share of women CEOs
47
1) "Consumer Discretionary" includes automobiles and components, consumer durables and apparel, consumer services, media, and retailing.
Note: Exhibit includes turnover events resulting from M&A and interims and excludes events with incomplete information.
Source: Strategy& 2015 CEO Success study
Percentage of incoming women CEOs in the U.S./Canada by industry
2004–2015
1.1%
3.1%3.2%
4.1%
6.8%
10.0%
4.0%
Cross
Industry
Information
Technology
Consumer
Staples
8.5%
Consumer
Discretionary1)
HealthcareUtilities Materials Energy Financial
Services
2.3%
5.6%
Industrials
1.7%
Women CEOs
Telecommuni-
cation
Services
April 2016Strategy& | PwC 48
32%23%
68%77%
Male CEOsFemale CEOs
Women CEOs are more often hired from outside the company than men CEOs are*
Note: Exhibit excludes turnover events resulting from M&A for incoming CEOs, interims for incoming and outgoing CEOs, as well as turnover events with incomplete information.
*The chi-square statistic is 7.5107. The p-value is.006133. The result is significant at p <.05.
Source: Strategy& 2015 CEO Success study
Incoming and outgoing CEOs by gender and pedigree
2004–2015
Insider CEOs
Outsider CEOs
April 2016Strategy& | PwC 49
From 2004 to 2015, women were 27 percent more likely to be forced out, but in 2015, for the first time, the difference was not statistically significant
Note: Exhibit excludes turnover events with incomplete information.
Source: Strategy& 2015 CEO Success study
Outgoing CEO by gender and pedigree
2004–2015
57% 62%
32% 25%
11% 13%
Ougoing male CEOsOutgoing female CEOs
M&A Forced turnover Planned turnover
April 2016Strategy& | PwC
Definition of terms
50
Succession: A succession event is defined as when a CEO leaves office, regardless of whether or not
a new CEO is selected to take his or her place, or when the company’s leadership structure changes to
add CEOs.
We group the succession reasons into three categories:
• M&A
• Forced
• Planned (successions that are the result of neither M&A nor a forced removal)
We determine whether a succession is forced or planned using reports in the press, analyst reports,
and the knowledge of Strategy& consultants from around the world.
Insider versus outsider CEO:
• Insider: A CEO is considered an insider if he or she worked at his or her current company at least
one day before becoming CEO.
• Outsider: A CEO is considered an outsider if he or she was hired directly from a company other than
the one he currently leads.
TSR: All total shareholder return figures we use are annualized TSR over the total tenure of outgoing
CEOs and are regionally adjusted, meaning that performance is measured relative to a regional index
(S&P 500, Brazil Bovespa, FTSE 100, CAC 40, etc.)
April 2016Strategy& | PwC
Methodol0gy
51
The CEO Success study identified the world’s 2,500 largest public companies, defined by their market
capitalization (from Bloomberg) on January1, 2015. We then identified the companies among the top
2,500 that had experienced a chief executive succession event between January 1, 2015, and
December 31, 2015, and cross-checked data using a wide variety of printed and electronic sources in
many languages. For a listing of companies that had been acquired or merged in 2015, we also
used Bloomberg.
Each company that appeared to have changed its CEO was investigated for confirmation that a change
occurred in 2015, and additional details — title, tenure, chairmanship, nationality, professional
experience, and so on — were sought on both the outgoing and incoming chief executives (as well as
any interim chief executives). Company-provided information was acceptable for most data elements
except the reason for the succession. Outside press reports and other independent sources were used
to confirm the reason for an executive’s departure.
Finally, Strategy& consultants worldwide separately validated each succession event as part of the
effort to learn the reason for specific CEO changes in their region. To distinguish between mature and
emerging economies, Strategy& followed the United Nations Development Programme 2015 ranking.
Total shareholder return data over a CEO’s tenure was sourced from Bloomberg and includes
reinvestment of dividends (if any). Total shareholder return data was then regionally market adjusted
(measured as the difference between the company’s return and the return of the main regional index
over the same time period) and annualized.
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www.pwc.com/structure for further details.
This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.