CEOs are generally considered to have failed when they are unable to meet the expectations of their board of directors, shareholders and the market at large, or the company’s stakeholders. This failure becomes official when a company confirms its decision to initiate proceedings for the CEO’s departure. What are the primary factors leading to this dissatisfaction? What is the CEO’s ability to react? And can the top executive be considered a “failure” when receiving a severance package worth millions?
Two decades ago, the research examining the CEO’s career path concluded that around 90 percent ended their careers due to natural causes such as retirement, lack of fitness or death. Hence, only 10 percent were unexpected, caused by another type of factor.
The authors argue that over the past few years this trend has gradually led to shorter, less stable incumbencies lasting between three and five years, due to reasons such as greater internal and external competition, having a corporate vision that is overly focused on the present and, more recently, the global financial crisis – which has resulted in CEO turnover being twice that seen during times of prosperity.
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