Boards Are Choosing Record Levels of Internal Candidates for CEO
Two separate studies of the backgrounds of new CEOs came to one notable and perhaps surprising conclusion: Boards are hiring internal candidates for a record share of CEOs at American companies.
Dale D. Buss
The Chief Executive article, "Boards Are Choosing Record Levels of Internal Candidates for CEO," features Russell Reynolds Associates' research on CEO profiles. The article is excerpted below.
Fully 85% of U.S.’ currently sitting CEOs came from internal appointments, up from 78%, compared with their predecessor class of 2012, concluded executive-recruitment firm Russell Reynolds Associates, after examining the background of more than 1,000 chiefs from 2015 data.
Russell Reynolds noted, “The profile of recently appointed CEOs has not changed as dramatically as the environments that surround them,” citing, among other factors, the greater demands that boards have placed on their CEO selections in terms of diversity of background and experience, often including a functional leadership role and a prior position running a P&L business.
Indeed, Russell Reynolds observed, “Given all the evidence of disruption and talk of innovation, one might have expected far more changes in the type of CEOs chosen. If anything, it appears boards are just finding new ways to land at a relatively safe and proven option.”
The vast majority of CEOs selected in the last few years, according to Russell Reynolds’ research, remain long-time company insiders. Even when the predecessor lasted less than three years, robbing the company time to plan an orderly succession, boards in the U.S. still chose an internal successor 73% of the time, the firm found. “And a growing share of recently appointed CEOs already have held a CEO role,” Russell Reynolds said.
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