Yesterday, ISS blogged about Booz Allen Hamilton’s annual CEO succession study, which reported several interesting findings that I also think are worth sharing. The study, which is based on the world’s 2,500 largest public companies concludes that the imperial CEO has been replaced by the inclusive CEO, as reported in the press release on the study – “The Era of The Inclusive Leader.”
As noted in the press release, the study shows that CEOs are becoming acutely aware that in order to succeed, they must listen to the concerns of their directors, shareholders and employees, and respond timely and appropriately. Thus, the days of CEOs answering only to themselves appear to be closer to a distant memory than today’s reality.
The study shows that boards are becoming less tolerant of current poor performance and indications of future underperformance than in the past. It used to be that boards would primarily only remove CEOs for proven underperformance, however, boards are becoming more focused on future performance and more inclined to remove CEOs based on indications of future underperformance.
The study also indicates that splitting the roles of chairman and CEO can be very beneficial to companies. Notably, in 2006, all of the underperforming CEOs of North American companies were also chairmen of their companies, or served under chairmen who were the companies’ former CEOs. The conclusion that investors benefit more when the positions of chairman and CEO are held by different individuals is a consistent conclusion on a global scale.
The press release is a quick read and I recommend checking it out.
