The #MeToo Movement has forced corporate America to examine it’s workplace culture and to make some tough choices in bringing down some powerful men, as evidenced in a report by The Conference Board, supported by Heidrick & Struggles.
According to the CEO Succession Practices report, companies in the S&P 500 ousted five CEOs in 2018 due to #MeToo-related misconduct, representing more than 40 percent of all CEO dismissals. That compares to just one CEO departure for personal misconduct in the S&P 500 from 2013 to 2017. Non-voluntary departures climbed to 30.5%, up almost eight percentage points from 2017.
Even more striking in the report is the decline in the number of women CEOs, despite growing calls for gender parity. The report found that women CEOs in the S&P 500 dropped by nearly 20% in 2018, down from a record 27 in 2017 and 26 in 2016.
The report pointed out that the departure of Margaret Georgiadis of Mattel, Indra Nooyi of PepsiCo, Denise Morrison of Campbell Soup, and Debra Reed of Sempra Energy, along with two female CEO departures due to their firms leaving the S&P 500 index Geisha Williams of PG&E Corp and Virginia Drosos of Signet Jewelers Ltd, were countered in 2018 by only one new female CEO in the manufacturing sector, Kathy Warden of Northrop Grumman.
The study, which examines CEO succession events announced in the S&P 500 in 2018, compared historical data that The Conference Board has been collecting since 2001.
It further noted that the total number of S&P 500 companies with a female chief is now at its lowest level since there were 21 female CEOs in 2015, which is only slightly higher than in 2012, when there were 20. “This decline underscores the degree to which gender parity remains elusive in corporate leadership, despite the unrelenting pressure from investors to improve gender balance in the C-suite and the boardroom,” the report said.
The dismissals of CEOs have benefited those on the inside with nearly 90% filling the open CEO positions in 2018 (52 out of 59). And of the 52 internal successors who became CEOs, 20 of them had at least two decades of experience at the company, while 25% of these seasoned executives have tenure of at least 30 years with their company. The rate of incoming CEOs in 2018 who are seasoned executives reached its second highest level recorded by The Conference Board at nearly four out of 10 internal appointments.
The rate of succession among older chief executives continues to climb, and there are still more CEOs aged 75 and over than there are CEOs under the age of 45, noted Matteo Tonello, managing director of ESG Research at The Conference Board's ESG Center and the principal author of the report.
The average incoming CEO age was 54 in 2018, or one year higher than the average for the period from 2001 to 2018, with the financial sector reporting the highest incoming CEO age for the 18-year period. Despite the higher rate of succession among older CEOs, at the end of 2018 there were seven sitting CEOs who are 75 or older compared with six sitting CEOs who are under the age of 45, the report said.
“In the coming months and years, a softening economic environment may very well unfold. Boards should be prepared, given a slowdown would likely spur an acceleration of CEO retirements and tightening of the market for top talent,” Matteo said.