US companies are hiring new chief executive officers this year at the quickest pace since 2005 as directors seek growth after putting off management changes while riding out the recession.
Turnover is running at a 13% rate this year after a 15-year low of 10% in 2010, according to a study of 669 large companies by Hinsdale-based search firm Crist Kolder Associates. The firm tracked moves through July at companies from the Fortune 500 and Standard & Poor's 500.
From Costco Wholesale Corp grooming a new chief to utility PGE Corp picking its first outsider ever, directors are now more willing to shift leaders, said Gail Meneley, founding principal at executive recruiter Shields Meneley Partners in Chicago. Boards want CEOs to tap cash hoards that reached $2.8 trillion at S&P 500 companies last quarter, she said.
"Over the last 30 months, there's been a huge focus on operating efficiency, downsizing, streamlining and cost reduction," said Meneley. "Now they're looking for people to drive growth, revenue and innovation."
Two S&P 500 companies announced moves this week: Costco, the largest US wholesale-club chain, named a successor for its 75-year-old CEO, Jim Sinegal, at year's end, while Bank of New York Mellon Corp. said its chief left due to "differences with the board" over how to manage the company. The C-suite churn includes CEOs as high profile as Apple's Steve Jobs, who took a medical leave in January as he battled cancer, then announced he was resigning on August 24. Jobs, 56, left after building the start-up he founded in 1976 into the world's largest technology company and a rival to Exxon Mobil as the biggest by market value. He rejoined Apple in 1997 after being ousted 12 years earlier and presided over a 9,000% stock gain.
Historically, CEO turnover runs counter to business cycles, said Peter Thies, senior partner at Los Angeles-based executive search firm Korn/Ferry International. Companies tend to hang on to leaders when the economy sours and seek new blood during an expansion as excuses vanish for slow growth, he said. "We are being put on more and more CEO searches. That activity is heating up."
Pent-up demand for leadership changes is enough to extend the pattern even as the economy slows, Thies said.
CEO turnover last year was the lowest since 1995, said Crist Kolder. A 13% rate for all of 2011 would be the highest since 16% in 2005, Crist Kolder said.
Some of the hiring this year stems from corporate crises that force a board's hand.
Salary and other compensation for 25 of the best-paid CEOs last year exceeded the US income-tax expenses their companies disclosed in public filings, the Washington-based nonprofit group Institute for Policy Studies said in a report released on Thursday. "CEOs shouldn't be rewarded for so aggressively avoiding their responsibility to pay taxes," said Chuck Collins, one of the authors.