The number of CEOs who were forced out of their jobs at large global companies fell to a new low in 2014, according to data for the world's largest 2,500 companies. While this might seem to be the result of complacency by boards of directors, this drop in terminations is actually a byproduct of improved corporate governance and better succession planning, according to the Harvard Business Review.
A Harvard Business Review analysis found regional and national differences in CEO succession rates have shrunk in recent years, suggesting better CEO succession practices are converging across the world.
The drop in CEO firings indicates boards of directors have improved the selection process and the transition from one CEO to the next. Between 2000 and 2008, forced turnovers accounted for 37 percent of departing CEOs. From 2009 until 2014, the percentage of CEO terminations dropped to an all-time low: 14 percent.
One factor that likely influenced this improvement is the increased focus on corporate governance between 2000 and 2014. An increased demand for transparency in governance, more qualified and independent directors, as well as the convergence of governance standards, have also contributed to fewer CEO dismissals, according to the report.
Directors and senior corporate leaders are also learning from the past — it is generally agreed that unplanned CEO changes, which are often symptomatic of poor CEO succession practices — are bad for company performance and are costly to shareholders. According to Strategy&'s annual Study of CEOs, Governance and Success, companies that fire their CEO lose an average of $1.8 billion in shareholder value, compared with companies that implement planned successions.