Executives aren’t known for being a remarkably diverse bunch of people. Most are near retirement age and tend to be white and male. According to research from The Corporate Board, the average CEO is 58 years old, with some being quite a bit older, like Warren Buffet of Berkshire Hathaway, who is currently 92 and still at the helm.
However, that may be changing, albeit slowly. While CEO turnover dropped to all-time lows in 2020 and 2021 due to a raging pandemic and other upheavals, like the significant shift to remote work and supply chain disruptions, they increased during 2022. By 2022, CEOs were exhausted from all the challenges, and many left in droves for other opportunities or simply to retire.
As a result, organizations are replacing their prior CEOs with new talent, and some are looking for younger executives who can offer unique and fresh perspectives.
The average age of retiring CEOs increased in the past few years, which isn’t surprising due to the macroeconomic issues companies experienced over the past few years and their desire to retain their existing CEO to help them overcome them. According to research, the average age of a CEO leaving their organization rose to 62.6 years.
Similarly, tenure in the role increased. Leaving CEOs had been in their positions for over ten years — significantly higher than in the decade prior when the average CEO run never touched the ten-year point.
Even more interesting are the people replacing aging CEOs. According to a report from Harvard, the median age of newly appointed CEOs is approximately 54 years old. In fact, nearly 30% of the newest CEOs are under 50 — something we haven’t seen since 2000.
To put the data into closer perspective, in 2021, just 12% of CEO roles went to people under the age of 50.
Another positive sign is the rising number of female CEOs. In 2022, 13% of newly-appointed CEOs were women. That’s an over 50% increase since 2021, when just 6% of new CEOs were female. However, keep in mind that there were only 56 new CEO appointments in 2022, and of those 56, seven were women.
It’s common for newly-appointed CEOs to also assume the role of chairman of the board of directors. However, organizations seem to be paying attention to the ‘G’ in ESG and opting for more substantial segregation between the board and the executive team. For the first time ever, not one of the new CEO appointments took the chairman role, too. That’s a tremendous shift from 2017, when 15% of new CEOs were named chairman.
Boards seem to be heeding the call for more robust diversity among their directors. Most directors have prior experience on other boards, and they shift companies when they’re asked to do so. This leads to a ‘good old boys’ network, where the same people simply move from company to company. However, in 2022, over a third of new directors had never served on a board before.
Larger organizations, particularly those in the S&P 500, typically have dedicated CEO succession plans that help to ensure continuity when it comes time for an established executive to leave. A succession plan includes the CEO’s planned retirement date, along with who their replacement will be. In public companies, the new CEO is typically an insider with experience leading various areas of the organization.
In cases where companies don’t have a large executive team but instead concentrate their leadership on just a handful of people, losing a CEO can cause significant issues. There may be just one or two people left to steer the ship — and they’ll likely have other matters to deal with. Taking ownership of the company’s overall business objectives can stretch the remaining executives too thin.
Companies that don’t already have a succession plan or need to appoint a new executive quickly should consider current trends concerning CEO appointments when choosing the right person to lead. Sometimes maintaining the status quo, like selecting a CEO candidate that mirrors the leaving CEO’s management techniques and decision-making skills, isn’t the right option.
Instead of selecting someone of the old guard, consider other options incorporating diversity and innovation into your decision. Your next CEO doesn’t need to be close to retirement age. There are plenty of people out there who can handle the role and bring unique insights into your company’s operations.
If you’d prefer an insider, look past your standard executive choices and consider vice presidents, directors, and other senior leaders you trust.
Appointing a female to the position, or someone from a diverse background, will signal your commitment to DE&I initiatives and potentially increase your company’s value. It can also help your organization attract top-tier talent interested in working for a forward-thinking organization.
Remember, appointing a new CEO will change the direction of your organization, so carefully weigh your options. You can always select an interim CEO to take over immediately, which gives you time to find the most suitable person for your executive role.
While most CEOs continue to be older, white, and male, there are signs that companies are looking outside the box when choosing their newest leader. Some organizations are hiring younger executives, and female leadership is on the rise. Stay abreast of trends in executive leadership to keep your organization relevant and innovative.
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