Two recent and prominent developments in the corporate world provide fodder for discussion by the board, and its nominating and executive succession committees, as they relate to matters of CEO tenure.
One such development is GE’s recent termination of its CEO, John Flannery, after he served only 14 months in that position. According to news reports, the termination was tied to concerns regarding missed financial targets and the perceived slow rate of organizational change. Those reports also attributed the move to increased board impatience resulting from what was perceived as a long period of declining company financial performance.
The broader governance issue presented by GE’s action is whether boards may be more willing in the future to move more quickly on decisions with respect to CEO effectiveness, particularly given volatile markets and competitive environments. The various news reports noted the inherent risks associated with the so-called “quick trigger” strategy.
A related development is the release of a new survey indicating that CEOs are, on average, of the highest age in the last 17 years, with at least 10 percent of CEOs being 65 years of age or older. The survey attributed this trend to a combination of factors: the lack of interest of many CEOs in retiring; the increasing comfort level of the board in retaining existing, well-performing CEOs; and broader interests of organizational stability. The retail and wholesale industries were exceptions to this trend. In addition, the survey noted that this trend may be a direct result of current economic conditions.