The FTSE 350 is more reliant on external chief executive appointments than other leading markets prompting observers to conclude that too few top leaders are being nurtured in the UK.

A survey from 25×25, a not-for-profit focused on improved gender balance among executives, shows that the largest 350 companies hire more external CEOs than the top companies in the US, France and Germany.

The FTSE 350 recruited 58% of CEOs externally compared to 27% in the S&P500, 23% in the DAX40 and 30% in the CAC40.

A report from 25×25 says: “UK plc’s reliance on transformative externally-sourced CEOs risks impacting UK growth, on the basis that any company requires a certain amount of transformative leadership, and currently an insufficient amount of these leaders are being developed internally.”

The report also contains a comment from Dame Alison Carnwath, a non-executive at Asda, saying: “Here we have research which stimulates good debate. Nomcos with experienced leaders will enjoy adding this to their debates about succession.”

Shorter tenure

An additional survey observation is that tenure in the UK is also much shorter than companies elsewhere in the world. In the FTSE 350, average tenure is five years, compared with just over six in the DAX40 and around eight years at the S&P500 and the CAC40.

Tara Cemlyn-Jones, CEO of 25×25, says there may be structural issues.

“The problem we are observing is that each Board regards its CEO succession as unique and therefore the data it tracks is for their specific company or sector. This limits the talent pools being benchmarked.”

The report concludes that there is “insufficient forward-looking data being used regularly by board to allow for an evidence-based discussion on what the future talent needs for the company might look like”.

25×25 says the survey results show that where chairs and board members  work closely with CEOs and heads of HR using “data-driven forward-looking framework” for succession and talent planning “the likelihood of viable internal candidates emerging increases significantly.”

According to 25×25, estimates are that poor CEO succession planning erodes £60-£140bn each year for UK plc.

The research comes at a time when CEO pay is rising amid an argument from senior City voices that increased remuneration was required to compete for “domestic and international talent”.