CEO Monthly May 2017

CEO MONTHLY / MAY 2017 9 , More Facts from the 2016 CEO Success study • CEO turnover: CEO turnover at the world’s largest 2,500 companies decreased from its record high of 16.6% in 2015 to 14.9% in 2016, due largely to the drop in merger and acquisition activity. CEO turnover was highest in Brazil, Russia, and India, at 17.2%, followed by Japan (15.5%) and Western Europe (15.3%) and China (15.2%). CEO turnover fell in every region we studied except for the U.S. and Canada. • Women CEOs: There were 12 women globally appointed to the role of CEOs in 2016 - 3.6% of the incoming class. This marks a return of the slow trend toward greater diversity that had been in place over the last several years, and a recovery from the previous year’s low point of 2.8%. The share of incoming female CEOs was highest in the U.S. and Canada, rebounding to 5.7% after falling for the previous three years. Five industries - healthcare, industrials, information technology, consumer staples, and telecom services - did not have a single incoming female CEO in 2016. About the 2016 CEO Success Study Over the course of the past 17 years, Strategy& has been tracking continuous data on CEO successions. The 2016 study analyzed CEO successions at the world’s 2,500 largest (by market capitalization) public companies over the last 10 years. For the purposes of this study, we define an ethical lapse as a scandal or improper conduct by the CEO or other employees; examples include fraud, bribery, insider trading, environmental disasters, inflated resumes, and sexual indiscretions. To learn more about the 2016 CEO Success study, visit www.strategyand.pwc.com/ ceosuccess could maintain a low public profile, today the lightning- fast flow of Web-based financial news and data ensures that negative information travels quickly and widely. Despite the global increase in forced turnovers for ethical lapses, companies in the U.S. and Canada have the lowest incidence of such dismissals - 3.3% in 2012-16 compared to 5.9% in Western Europe and 8.8% in the BRIC countries. More stringent governance regulation is one likely reason. Both the legislative requirements for codes of conduct and anti-bribery statutes have been tightened significantly in the United States. Bigger Company, Bigger Target The study also found that at the largest companies (those in the top quartile by market capitalization) in the U.S. and Canada and Western Europe, the overall share of CEOs forced out of office was significantly greater than the share forced out in the other market-cap quartiles. “The fact that forced turnovers for ethical lapses were even higher at companies in the top quartile by market capitalization in these regions supports our hypothesis, since the largest companies are the most affected by the five trends and are subject to the greatest scrutiny,” says Kristin Rivera, partner and global forensics clients and markets leader with PwC US. “The increasing incidence of CEOs being forced out of office for ethical lapses may have a positive effect on public opinion over time by demonstrating that bad behaviour is in fact being detected and punished,” says DeAnne Aguirre, global leader of Strategy&’s Katzenbach Center of Innovation for Culture and Leadership, principal with PwC US. “In the meantime, CEOs need to lead by example on a personal and organizational level and strive to build and maintain a true culture of integrity.”