November Continues Growth Trend in Executive Turnover

Liberum’s executive turnover data for the month of November has continued to show growing turnover within the executive ranks similar to what we have seen for most of previous months this year. This trend was a complete reversal of what we saw for the previous two years. November’s increase in executive turnover took place while we saw a positive trend with regard to the number of people filing new unemployment claims and, even more significantly, the economy has actually generated more jobs. This is not say we are out of the woods with regard to overall employment and the economy but more positive employment signs continue to show up. In early December, the United States Department of Labor’s Bureau of Labor Statistics (BLS) announced the latest employment numbers. The official unemployment rate dropped a modest 0.4% down to 8.6%, the lowest rate since March 2009. There still remains 13.3 million people unemployed a seriously high number. The modest gain in employment is further tempered by the fact that according to BLS 315,000 people had given up looking for work. Even las t week we saw another drop in the number of people applying for unemployment.

Below Liberum has outlined in graphical format a November breakdown for CEO, CFO and overall C-level related turnover.

C-LEVEL RELATED CHANGES FOR NOVEMBER

CEO RELATED CHANGES FOR NOVEMBER

CFO RELATED CHANGES FOR NOVEMBER

For the month of November, CEO changes increased a huge 125%, CFO changes increased 111%, overall C-level (as defined by Liberum Research as board of directors, CEOs, CFOs down to corporate VPs) changes increased 94% while board of director changes declined 11% as compared with November 2010 totals. The month to month change in executive turnover on the other hand was negative for November 2011 when compared with October 2011 totals. CEO changes declined 12%, CFO changes declined 15%, overall C-level changes declined a mere 2% and board of director changes declined only 3%. Liberum expects the fourth quater of 2011 to show an increase over the same quater in 2010. Stay tuned.

Second Quarter Executive Turnover Shows Real Growth

With the end of the second quarter, the United States economy appears to have turned a major corner in relation to executive turnover. Executive turnover, as tracked by Liberum, has seen a continuing jump in the totals for June 2011 and the second quarter. The jump in turnover has been apparent when second quarter was compared with the same quarter in 2010 as well as in relation to the previous first quarter of 2011. The continuing jump in executive turnover appears to be at odds again with the level of employment and unemployment in the United States economy. Troubling signs for overall employment continue to haunt the U.S. economy as the recovery continues to limp along.

Now that we are finally seeing changes at the top of corporations, hope can increase that companies will finally begin to start hiring again. Liberum contends that the slow level of executive turnover over the previous number of years related to the reluctance corporate boards and top executives had to change top leadership during tough economic times except in situations where the firm in question performed so poorly that a top executive change was necessary or if a major strategic change change in strategy was needed. As we moved into 2011, we finally saw the level of unemployment bottom out.

Liberum expects that if the economy manages to recover, even ever so slightly, the level of executive turnover will continue to rise. Both the pent up demand for new top executives and the possibilities for new job opportunities will account for growing executive turnover. Also boards are expected to be more willing to make changes as the economy continues to move in a positive direction especially if the debt ceiling problem is resolved, even temporarily.

Below are three simple graphics outlining the quarterly management changes as registered through Liberum’s Management Change Database for 2008 through 2011 (second quarter) for CEO, CFO and overall C-level turnover. The first two quarters of 2011 dramatically illustrate the reversal in trends we have seen for a number of years. Executive turnover is again in the ascendancy. We expect this trend to continue unless the economy encounters some kind of major shock, lack of agreement on the debt ceiling, for example, a major sovereign bankruptcy (Greece) or something totally unforeseen.

Quarterly Executive Turnover Continues to Decline While Overall Unemployment Remains High

Executive turnover has continued to decline throughout the economic and financial crisis and even as the recession ended according to the official proclamation by the National Bureau of Economic Research. Liberum Research’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 third quarter of 2010. The 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). While the first three quarters of 2010 continued to show significant declines in executive turnover, particularly when compared with the first, second and third quarters of 2009, we are beginning to see the overall executive turnover declines slowing when the quarterly figures are compared with each previous quarter of 2010.

• Third quarter 2010 CEO changes dropped 27%, CFO changes dropped 8% and overall C-level changes for the third quarter dropped 32% respectively when compared with the third quarter totals for 2009.

• The drop in changes for the third quarter of 2010 was much smaller when compared with the second quarter totals for 2010 - the drop was 21% for CEOs, 7% for CFOs and 6% for overall C-level changes.

While monthly executive turnover numbers have been smaller since early 2008, the investment opportunities they represent are still quite significant. Below Liberum put together three graphs representing the total executive related changes (CEOs, CFOs and C-level changes) by quarter for 2005 through the third quarter of 2010.

2nd Quarter Executive Turnover Remains Slow - Inkling of Shift Arises

Executive turnover in the second of quarter of 2010 continues to decline as the financial crisis and the related recession still impact executives at companies large and small. While overall worker employment has remained a serious problem, companies have done little to change top executives during the economic crisis. This is not to say there have not been major executive changes at public companies but rather the totals have been lower than in the past. Investors need to keep on top of executive changes as a way to monitor their investments or investments they might be considering.

Second quarter 2010 CEO and CFO overall changes both dropped 16% when compared with the second quarter totals for 2009. Overall C-level changes (defined by Liberum as covering board of directors, CEOs, CFOs, COOs, CIOs, presidents, EVPs, SVPs down to VPs) for the second quarter of 2010 dropped a whopping 37% when compared with the second quarter of 2009. The drop in C-level changes for the second quarter of 2010 was much smaller when compared with the first quarter total for 2010 - the drop was only 7%. The percentage drops for CEO and CFO changes for the second quarter were also much smaller when compared to the first quarter of 2010 than the totals for the first quarter of 2009. Below are three separate graphical representations of the quarterly change totals for CEO, CFOs and C-level executives.

Liberum Research - Third Quarter Executive Change Comparisons Show Declines

The overall unemployment figures continue to diverge with executive turnover figures compiled by Liberum. Liberum has just completed analyzing third quarter figures for executive turnover. The key totals showed a continuing decline in executive turnover for CEOs, CFOs and overall C-level management as compared with the same time frames in 2008 and 2007 (view graphs below).

• CEO turnover declined 23%, CFO turnover declined 36% and overall C-level turnover (from board of directors on down to corporate vice presidents) registered a 24% decline for the third quater of 2009 as compared with the third quarter in 2008. The decline percentages were even larger when compared with the 2007 third quarter.

Investors need to keep a close eye on specific executive changes as well as the actual trends.

Management Turnover Data for 2007 and 2006

Corporate management turnover in 2007 was slightly below the record levels registered for 2006 but remained very high. 2007 CEO, CFO and C-level turnover totals registered an overall decline of 5%, 2% and 2% respectively from that of 2006. The actual CEO and CFO changes for 2007 overall, however, were far more "significant" and in many cases were far more high-profile for the companies involved than were those registered in 2006.

2007 turnover data began to trend upwards after the first quarter of 2007 concluded. The first quarter of 2007 recorded dramatic declines from the same quarter in 2006. CEO turnover declined 17%, CFO turnover declined 22% and overall C-level management declined 15% in the first quarter of 2007 as compared with the same categories in 2006. The last three quarters of 2007, however, trended upward and are expected to continue at a high level into 2008. Each of the last three quarters showed a similar pattern in overall management changes with the record level of turnover recorded during 2006. Turnover totals for the last three quarters of 2007 were nearly the same as those in 2006 (see the data below).

2005, 2006 & 2007 QUARTER BY QUARTER
C-LEVEL CHANGE COMPARISONS
ALL C-LEVEL CHANGES
(Directors, CEOs, CFOs down to VP Level)

2005
1st Quarter - 3,135
2nd Quarter - 3,354
3rd Quarter - 3,787
4th Quarter - 6,396
TOTAL - 16,672

2006
1st Quarter - 7,539
2nd Quarter - 8,316
3rd Quarter - 6,214
4th Quarter - 5,989
TOTAL - 28, 058
(a 68% increase over 2005)

2007
1st Quarter - 6,430
2nd Quarter - 8123
3rd Quarter - 6321
4th Quarter - 6483
TOTAL - 27,357
(2% decline from 2006)

CEO CHANGES

2005
1st Quarter - 518
2nd Quarter - 500
3rd Quarter - 400
4th Quarter - 481
TOTAL - 1,899

2006
1st Quarter - 755
2nd Quarter - 727
3rd Quarter - 650
4th Quarter - 611
TOTAL - 2,743
(30% increase over 2005)

2007
1st Quarter - 626
2nd Quarter - 686
3rd Quarter - 641
4th Quarter - 664
TOTAL - 2,617
(5% decline from 2006)

CFO CHANGES

2005
1st Quarter - 457
2nd Quarter - 426
3rd Quarter - 408
4th Quarter - 426
TOTAL - 1,717

2006
1st Quarter - 630
2nd Quarter - 654
3rd Quarter - 551
4th Quarter - 466
TOTAL - 2,301
(23% increase over 2005)

2007
1st Quarter - 489
2nd Quarter - 646
3rd Quarter - 620
4th Quarter - 574
TOTAL - 2,329
(1% increase over 2006)

If you are intersted in more detailed data contact me by email.