Were they pushed or did they jump? That’s the question often asked after a CEO resignation. Research in the US using new statistical techniques suggests most CEOs are pushed out by boards concerned about their performance. But the stats also indicate that some US boards may be struggling with their CEO succession planning.

A study conducted at Stanford University finds that 29% of CEO turnover “events” involved a high score (8-10) on the “push-out” scale, indicating the chief executives involved were likely forced out by their boards, while 23% score 0-2 on the scale, suggesting they were highly likely to be voluntary departures. The rest, 48%, received middling scores indicating some level of ambiguity.

The Stanford team looked at 1,399 CEO departures in Russell 3000 companies from 2017 to 2021. They used the push-out scale to rate the CEOs on a scale of 0 to 10: 0 indicating near certainty that the chief executive was “not at all” likely to be terminated, while 10 suggests the CEO was almost certainly forced out by their board.

Reporting on their findings, the authors write: “This is unexpected. Most traditional research finds that CEO terminations are less frequent than voluntary resignations, whereas push-out scores suggest that terminations are more frequent. Boards might be more willing to terminate a CEO than researchers have historically recognised.”

Retired, resigned—or pushed out?

UK regulators have been concerned for some time about the state of company succession planning. Elsewhere, observers expect more turnover of US CEOs as companies come to terms with the post-pandemic business environment, growing regulatory demands and the need for a broader range of boardroom skills, among them ESG.

The current research came about because of the high-level of interest in uncovering why CEOs move on, given the varied and ambiguous language used to describe their departures in public statements. Companies use anything from “retired” to “stepped down”, “resigned” and “left the company”.

Intriguingly, the study finds those departures described as “retired” involve around one in ten that score high on the scale “suggesting that the executive did not voluntarily retire at all”. Similarly, of the “stepped down” cohort 41% scored highly meaning likely to have been pushed; 56% among those who”resigned”; and 59% of those who “left the company”.

“These patterns underscore the ambiguity of language used to describe CEO departures and demonstrate why outsiders have difficulty relying on company-provided explanations to determine whether a CEO was fired or resigned,” the academics write.

US CEO succession planning

The study also highlights difficulties with succession planning. Most CEOs named immediately after their predecessors are internal appointments at 72%. When a successor appointment is delayed after departure they more than likely to be external appointments (74%).

When a CEO leaves voluntarily, 89% of successors are internal candidates. When the CEO is forced out there’s a more even split among successors, with 46% external, 41% internal executives and 13% coming from among current non-executives.
A third of boards, 33%, are unable to name a successor, whether internal or external, at the time the sitting CEO exits.

The authors ask: “What new disclosure on succession planning or human capital management could improve investor insight into this area and provide incentives for boards to increase their readiness for succession events?”

Taken together the statistics seem to reveal a more complex picture of CEO departures than the binary equation of either being pushed or falling. “Instead, CEO resignations appear to be vary based on the pressure the board exerted on the executive to resign,” the authors write.