1.
David F. Larcker and Brian Tayan
Corporate Governance Research Initiative
Stanford Graduate School of Business
CEO SUCCESSION
DATA SPOTLIGHT

2.
LABOR POOL OF CEO TALENT
U.S. CEOs
Number of CEOs > 5,000 Prior to CEO: finance 31%
Average tenure as CEO 9 years Prior to CEO: operations 15%
%, 0-5 years as CEO 50% Prior to CEO: marketing 15%
%, 6-10 years as CEO 26% Prior to CEO: other 39%
%, 11-15 years as CEO 13% International experience 34%
%, 16+ years as CEO 13% Military experience 7%
Same company entire career 19% MBA degree 35%
Equilar (2018); Spencer Stuart (2007, 2008); The Conference Board (2017); Heidrick & Struggles (2017)
There are approximately 5,000 CEOs of publicly traded companies in the U.S.
CEOs have a diverse set of skills and experiences.

3.
CEO TURNOVER RATE
The Conference Board (2017)
Sample includes S&P 500 companies.
Approximately 11% of CEOs turn over each year.

4.
DEPARTING CEO TENURE
The Conference Board (2017)
Sample includes S&P 500 companies.
Executives generally serve as CEO for 9 years before leaving.

5.
CEO TURNOVER RATES BY REASON
Strategy& (2017)
Sample includes 2,500 largest publicly traded companies globally.
CEOs leave for a variety of reasons, including health, new job, planned retirement,
forced termination, or loss of job following a takeover.

6.
OUTSIDE HIRES AS A PERCENTAGE OF NEW CEOS
Murphy and Zábojník (2007)
Sample includes those in Forbes annual surveys 1970-1999, and companies in S&P 500 and S&P MidCap 400 2000-2005.
1970-1979
Average: 15.0%
1980-1989
Average: 17.1%
1990-1999
Average: 26.0%
2000-2005
Average: 32.7%
Companies typically promote an internal executive to become CEO.
However, over time the number of externally recruited CEOs has increased.

7.
COMPANIES THAT DEVELOP THE MOST FUTURE CEOS
Company # Future CEOs Company # Future CEOs
General Electric 49 General Motors 13
IBM 47 Johnson & Johnson 13
Procter & Gamble 28 Xerox 13
AT&T 21 ExxonMobil 13
Hewlett-Packard 21 Macy’s 12
PepsiCo 21 American Express 11
Ford Motor 19 Intel 11
Honeywell 19 Kraft Foods 11
Motorola 18 Rockwell Automation 11
Lucent Technologies 14 United Technologies 11
Cai, Sevilir, and Yang (2015)
Shows the number of executives with managerial-level experience that subsequently became CEO at other corporations during the
sample period 1992 to 2010.
A subset of companies develop a large number of executives who
eventually become CEOs at other corporations.

8.
TENURE OF INSIDE CEOS PRIOR TO PROMOTION
The Conference Board (2017)
Sample includes S&P 500 companies. Tenure is number of years at company prior to becoming CEO.
Internally promoted CEOs have 15 years experience, on average,
prior to becoming CEO.

9.
TOTAL COMPENSATION FOR NEWLY HIRED CEOS
Equilar (2015)
Sample includes S&P 1500 companies. Median compensation.
Internally promoted CEOs earn lower first-year total compensation
than externally recruited CEOs.

10.
AGE OF INCOMING CEOS
The Conference Board (2017)
Sample includes S&P 500 companies.
Newly hired CEOs are 53 years old, on average….

11.
FEMALE INCOMING CEOS
The Conference Board (2016)
Sample includes S&P 500 companies.
… They are also overwhelmingly male.

12.
COGNITIVE ABILITY OF CEOS RELATIVE TO POPULATION
Adams, Keloharju, and Knüpfer (2014)
Sample includes over 1 million males in Sweden. Cognitive ability based on the results of mandatory military enlistment tests administered at age 18.
The test consists of four subtests to measure inductive reasoning, verbal comprehension, spatial ability, and technical comprehension. Results
distributed on a nine-point scale, with 1 representing the group with the lowest test results and 9 representing those with the highest test results. CEOs
divided by asset size of the companies they manage.
There is some evidence that CEOs have higher-than-average cognitive ability…

13.
NON-COGNITIVE ABILITY OF CEOS RELATIVE TO POPULATION
Adams, Keloharju, and Knüpfer (2014)
Sample includes over 1 million males in Sweden. Non-cognitive ability based on the results of mandatory military enlistment tests administered at age
18. The test consists of a psychological interview to measure social maturity, intensity, psychological energy, and emotional stability. Results
distributed on a nine-point scale, with 1 representing the group with the lowest test results and 9 representing those with the highest test results. CEOs
divided by asset size of the companies they manage.
… and psychological and emotional stability.

14.
HEIGHT OF CEO
Adams, Keloharju, and Knüpfer (2014)
Sample includes over 1 million males in Sweden. Height measured as part of mandatory military enlistment tests administered at age 18. The midpoint
of the height ranges above in feet and inches are <5’ 5”; 5’ 6”; 5’ 8”; 5’ 10”; 6’; 6’ 2”; 6’ 4”; >6’ 6”.
CEOs are also taller.

15.
SUCCESSION WINNERS AND LOSERS
Larcker, Miles, and Tayan (2016)
Sample includes CEO transitions at 100 largest U.S. companies 2005 to 2015; stock price performance compares only matched pairs
of CEO successors and the executives from those companies that were passed over and became CEO at another company.
CEO Transitions
121
Chosen as successor
121
Passed over for CEO
100
Stayed at company
26%
Left company
74%
Became CEO
30%
Below CEO level
41%
Retired
30%
-22%-2%
3-year stock price
relative to S&P 500
Executives that “lose” the succession race generally leave the company.
They often do not perform as well as succession “winners.”

16.
Equilar. CEO Tenure Drops to Just Five Years. January 2018.
Spencer Stuart. Route to the Top. 2007, 2008.
The Conference Board. CEO Succession Practices. 2016, 2017.
Heidrick & Struggles. CEO & Board Practice: Route to the Top 2017. 2017.
Strategy&. Explore 17 Years of CEO Changes. 2017. Available at: https://www.strategyand.pwc.com/ceosuccess#showGraph.
Kevin J. Murphy and Ján Zábojník. Managerial Capital and the Market for CEOs. Social Science Research Network. 2007.
Ye Cai, Merih Sevilir, and Jun Yang. Made in CEO Factories. Social Science Research Network. 2015.
Equilar. In With the New: Compensation of Newly Hired Chief Executive Officers. February 2015.
Renée Adams, Matt Keloharju, and Samuli Knüpfer. Match Made at Birth? What Traits of a Million Swedes Tell Us about CEOs. Social
Science Research Network. 2014.
David F. Larcker, Stephen A. Miles, and Brian Tayan. Succession “Losers”: What Happens to Executives Passed Over for the CEO Job?
Stanford Closer Look Series. October 2016.
BIBLIOGRAPHY