They're falling like flies.
Just last month, John Lederer abruptly departed from the top job at Loblaw Cos. Ltd. after failing to turn around the supermarket giant's sliding profits and stock price.
In August, Derek Pannell was asked to resign from his post as chief executive officer of Falconbridge Ltd. after Swiss-based Xstrata PLC won a takeover battle for the Canadian miner.
In the U.S., Viacom Inc. CEO Tom Freston was dismissed last month after the company's controlling shareholder grew weary of the conglomerate's sluggish share price. Bristol-Myers Squibb Co. CEO Peter Dolan was also fired last month after he botched an effort to keep a generic version of the company's best-selling drug off the market, sparking an antitrust investigation by the Justice Department.
These are among the many executives this year who have either left or been dismissed from the top job in the corner office in North America and around the world. "The pressure is mounting more than ever for performance, and the highest of ethics," says Toronto-based executive recruiter Jay Rosenzweig.
At U.S. publicly traded companies, a chief executive stepped down every 90 minutes during business hours in August, according to a survey by Chicago-based global outplacement agency Challenger Gray & Christmas Inc.
The agency found that a record 1,355 CEOs left their jobs in 2005. But it looks like this year will set its own new record. With 960 CEOs already out the door by the end of August, the 2006 total is expected to surpass 1,400 by year's end, the outplacement agency says.
And it's not just a U.S. phenomenon. Globally, CEO departures peaked in 2005 with 15.3 per cent of major companies replacing their leaders, up from 9 per cent in 1995, according to a study of the world's 2,500 largest companies, including 98 in Canada, by New York-based management consultancy Booz Allen Hamilton.
The survey found that 14 of those 98 Canadian companies lost their CEOs last year. Three of them were planned for retirement reasons; five were "asked to leave" by their boards and six left following a merger or acquisition, Booz Allen spokesman Michael Bulger says.
The CEO's job used to be the pinnacle of a corporate career, but tougher board scrutiny, shareholder impatience and booming merger and acquisition activity are all fueling greater turnover in this top spot, management experts say.
The rash of departures at major U.S. companies this year have included William Clay Ford Jr. at Ford Motor Co., Roger Deromedi at Kraft Foods Inc., Henry McKinnell at Pfizer Inc., Scott NcNealy at Sun Microsystems Inc., William Perez at Nike Inc. and David Edmondson at RadioShack Corp.
Challenger Gray CEO John Challenger says that turnover among CEOs is gaining momentum because there are "more aggressive or activist boards" in the wake of accounting scandals at companies such as Enron Corp., and a growing concern about corporate governance.
"Boards have been empowered," he says. "They are no longer a rubber stamp." With directors asking probing questions and retaining outside experts to advise them because they risk shareholder lawsuits, "the role of the board vis-à-vis the CEO and the management team has become much more adversarial," he adds.
Mr. Rosenzweig agrees. "Performance of a company or stock price can really influence the departure of a CEO. Shareholders are often impatient, and want to see instant changes if a business is underperforming," says the managing partner of Rosenzweig & Co.
Sometimes, the growing pressure for change at the top comes from institutional investors, private equity firms and hedge funds. Other times, it can come out of the blue from the controlling shareholder.
Viacom executive chairman Sumner Redstone, for example, orchestrated the "resignation" of Mr. Freston after only eight months in the CEO job. "Nobody even thought it was coming," Mr. Challenger says. "Here, the CEO's fate is in the control of one person."
In the case of Loblaw, the controlling shareholder -- the Weston family -- was also influential in the board's decision to remove Mr. Lederer from his job. Some analysts didn't see the change coming because Mr. Lederer was steering the grocer through a restructuring.
The sudden departure of Mr. Lederer -- who was president but effectively held a CEO position at a company that does not use that title -- indicates there was "pressure for quick results," Mr. Rosenzweig says.
Life as a CEO can also be shortened as a result of mergers and acquisitions. "Canada has gone through a lot of M&A activity of late," and particularly in the energy and mining sectors, says Jeffery Rosin, managing director for Canada at executive search firm Korn/Ferry International.
A survey of corporate executives and investment bankers released last week by law firm Blake Cassels & Graydon LLP predicted that M&A activity in Canada will reach record levels over the next year.
With mergers, there can be a duplication of CEO roles, meaning one person has to leave, or a company may want a different leader for a newly acquired subsidiary.
Mr. Pannell's dismissal from Falconbridge was not a surprise after a rival bid led by Inco Ltd., which he backed, lost to Xstrata. "If you are backing the wrong horse, then the reality is that you are not going to last going forward," Mr. Rosin says.
Mr. Challenger expects turmoil in the top job to continue as boards become even more assertive and the economy falters. "As the economy starts to slow, often the CEOs are scapegoats," he says.
The high turnover at the top appears to be causing jitters among potential CEO candidates, who are becoming more cautious about signing an employment contract, recruiters say.
"Negotiations are longer, and the issue of severance becomes far more important," Mr. Rosenzweig says. "It varies, but top people are pushing for over two years of severance . . . whereas, 10 years ago, a 12-month severance would be negotiated. . . . CEOs are typically pushing the companies to really share in their risk."
© Copyright 2006 Bell Globemedia Publishing Inc. All Rights Reserved.
