Declining Executive Turnover May Have Bottomed - Good News for the Economy?

Executive turnover has continued to decline throughout the great economic recession. Liberum’s latest quarterly turnover numbers for CEOs, CFOs, Board of Directors and C-level executives (defined to include CEOs, board of directors, CFOs, COOs, down to VP level) continued to show a drop in turnover for all key categories for the first quarter of 2010. This declining trend in executive turnover has continued since the first quarter of 2008 for all key executive turnover categories (see the CEO, CFO and C-level graphs below for quarterly turnover comparisons). For the first time since early 2008, Liberum expects the declining trend in executive turnover to have bottomed. We expect to see turnover numbers to begin to increase as we move into the second quarter of 2010.

While the first quarter of 2010 continued to show significant declines in executive turnover when compared with the first quarter of 2009, we have finally seen the overall executive turnover declines slowing when the figures are compared with the last quarter of 2009. If this trend continues, increased executive change at the top of companies may actually mean the economy is in for real expansion and growth.

GRAPHICAL REPRESENTATION OF QUARTERLY EXECUTIVE TURNOVER 2005 - 2010

Recommended Reading - Financials Post Sign of the Times: CEO Wanted, Wall Street Journal

Susanne Craig and Joann S. Lublin wrote a story that appeared in today’s Wall Street Journal that examined the dearth of financial CEOs available to come in and run many of our troubled financial companies. According to the story,

The strain of the credit crisis, curbs on executive compensation and the specter of government scrutiny are making it harder for financial firms to lure chief executives, according to directors, executives and search firms.

“There aren’t any highly attractive CEO prospects in the financial-services industry,” said Peter D. Crist, head of Crist|Kolder Associates, an executive-search firm in Hinsdale, Ill. “The best players won’t risk their careers going to a troubled enterprise.”

… One problem is that the financial industry’s crisis has shown that some firms simply might be too much for anyone to conquer. Eventually, boards will find new CEOs who are confident enough to give it a try no matter how big the risks. For now, the pickings are slim, said recruiters involved in continuing searches.

I am not quite as sanquine about the prospects for finding new CEOs to run the troubled financial firms as are those referred to in the story e.g., executive search firms, directors and executives. I agree that finding the right candidates will be challenging but that is always the case. There are good candidates out there and many are up to the challenge, even if compensation does not meet their initial expectations. Decide for yourself, check out the story.

Recommended Reading - Bank chiefs likely to stay in place, CNNMoney

David Ellis of CNNMoney wrote a story today analyzing why many experts think bank CEOs in troubled banks will remain in their jobs. While I do not fully agree, the story is a very worthwhile read.