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THE FINANCIAL CRISIS

CEO turnover hits a record high

A survey says 1,132 chiefs have left their posts this year amid a tough economy.

October 09, 2008|Tiffany Hsu | Times Staff Writer

The roiling economy appears to be ripping into the ranks of upper management, pushing the chief executive turnover rate in a popular survey to an all-time high.

This year, 1,132 CEOs have left their posts, according to employment consulting firm Challenger, Gray & Christmas Inc. That is the highest nine-month total since the firm began keeping track in 1999, and makes it likely that 2008 will eclipse the record 1,478 seen in 2006.

The tally of departed CEOs includes those who have retired, left for better jobs or otherwise resigned on their own accord. But Challenger's own chief executive says the rise in the turnover rate probably reflects increasing pressure on corporate leaders from their boards and shareholders.

"When in a difficult economic time, more companies report poor results and shareholders are upset," John A. Challenger said. "Sometimes, the CEOs have actually mismanaged; sometimes they're scapegoated. Either way, they're more vulnerable."

The survey is based on public announcements and covers private and public companies. Among the prominent CEOs who stepped down this year were Angelo R. Mozilo of Countrywide Financial Corp., Meg Whitman of EBay Inc. and Philip J. Schoonover of Circuit City Stores Inc.

Richard Koppes, a corporate governance attorney at law firm Jones Day in San Francisco, said the high salaries paid to many chief executives can also be a liability.

"There's a lot of anger at executive compensation that is causing boards to say, 'We're paying you well, so you'd better perform,' " he said.

The digital information age is also contributing to turnover, said Leslie Gaines-Ross of public relations firm Weber Shandwick, which issued a study on the executive departures this year.

"These are much harder times because of the Internet, where more information and leaks and chatter from former employees and others create more chances for the CEO to be compromised," she said.

"It's the nature of the CEO job to have a short shelf life . . . ," she added. "If you make it to five years, you're an old-timer."

Other findings from the Challenger survey:

* Twenty-seven CEOs were fired, 354 resigned and 283 retired. Other chiefs lost their jobs for other reasons. Challenger said the numbers don't tell the whole story: Often executives resign or retire under board pressure.

* Turnover was heaviest in the healthcare sector, with 206 departures. In part, however, that stems from the large number of small healthcare businesses, Challenger said.

* Financial firms took the second-highest hit, with 133 exits.

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tiffany.hsu@latimes.com

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