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Is Stock Performance Losing Influence on Whether a CEO Stays or Goes? New Study Suggests ESG Factors May Be Swiftly Gaining Ground


Total shareholder return (TSR) has long been one of the most reliable predictors of CEO turnover. But, a new analysis raises the possibility that boards of directors and shareholders are making other considerations a factor for changes in the corner office—including environmental, social, and governance (ESG) performance. The gap between CEO succession rates of better-performing and worse-performing companies, in terms of industry-adjusted TSR, narrowed sharply in 2020. In the S&P 500, the gap shrank from 8.9% in 2019 to only 2.2% in 2020–the largest recorded narrowing in nearly two decades.

Those findings and more come from a new report by The Conference Board, produced in collaboration with global leadership advisory firm, Heidrick & Struggles, and ESG analytics firm, ESGAUGE. The study reviews CEO succession event announcements made at Russell 3000 and S&P 500 companies in 2020 and, for the S&P 500, the previous 19 years.

“The notion of what constitutes effective CEO performance is evolving beyond the short-term total shareholder return metrics. It is increasingly accounting for factors that play a key role in the sustainable success of the business—from promoting a diverse, fair, and inclusive workplace to optimizing the use of natural resources, to protecting employees’ security and well-being, and more,” said Matteo Tonello, a co-author of the report and Managing Director of ESG Research at The Conference Board.

“As the economy and companies have shifted from recovery to growth, the pace of CEO turnover has picked up. Boards should be fully prepared with a diverse bench of potential successors and ready to respond to CEO and executive moves. Amid an increasingly competitive market for top talent, we are seeing companies deploy leadership development programs that ensure their organizations are preparing a range of leaders as potential CEO-ready successors,” said Lyndon Taylor, Managing Partner of Heidrick & Struggles’ Diversity, Equity & Inclusion Practice, and Regional Managing Partner of its North American CEO & Board of Directors Practice.

Among the insights from CEO Succession Practices in the Russell 3000 and S&P 500: 2021 Edition:

Is total shareholder return losing influence on the decision to change a CEO? For the first time in nearly 20 years, the gap narrowed sharply between CEO succession rates of better-performing and worse-performing companies.

  • Total shareholder return may no longer be the quintessential predictor of whether a CEO leaves. Factors beyond stock performance may be gaining influence.
  • Russell 3000: In 2019, there was a 10% gap in the average rate of CEO succession with stock performance between better-performing and worse-performing companies. But in 2020, the gap narrowed to 5.3%.
  • S&P 500: In 2019, there was an 8.9% gap in the average rate of CEO succession with stock performance between better-performing and worse-performing companies. But in 2020, the gap narrowed to 2.2%.

In the second half of 2020, the rate of CEO succession sped up significantly. Companies became more confident in their transition plans.

  • At the beginning of the COVID crisis, fewer companies chose to compound business uncertainties by changing their CEOs: During the first half of 2020, as companies sought to steady the ship during the outset of COVID, only 71 companies in the Russell 3000 announced CEO successions.
    • The rate was 11% lower than the average turnover level recorded in prior years.
  • In the second half of 2020, however, CEO succession activity picked up significantly: Because of the marked increase, in 2020 the average rate of CEO succession ended up clocking in at 11.6%.
    • The 11.6% rate is relatively on par with that of prior years. (In 2019, for example, it was only slightly higher, at 11.9%.) A similar story plays out in the S&P 500.

“When COVID-19 unexpectedly upended day-to-day life in the US starting in mid-March 2020, it was not surprising that companies chose to leave the same generals on the battlefield rather than compounding new, unexpected business risks with the uncertainties of a leadership turnover. However, the rebalancing that took place in the second half of the year suggests that, after the initial assessment of the implications of lockdowns and other measures, most companies concluded that their succession planning process was strong enough to weather the volatile environment,” said Jason Schloetzer, a co-author of the report and Professor at Georgetown University's McDonough School of Business.

At bigger companies, gender diversity stalled—or even declined.

  • Only smaller companies saw a net increase:
    • In the Russell 3000, there was a net increase of 6 women CEOs among manufacturing and nonfinancial services companies with annual revenue under $5 billion.
    • There also was a net increase of 4 women CEOs among Financials and Real Estate companies with less than $25 billion in assets.
  • Net decrease at bigger companies:
    • The number of women CEOs did not grow in any other size groups.
    • In particular, there was a net decrease of 1 female CEO in all manufacturing and nonfinancial services companies with more than $5 billion in annual revenue.
    • There was also a net decrease of 1 female CEO among Financials and Real Estate companies with asset value over $25 billion.
  • Despite calls for more diversity at the top, women made minimal progress:
    • Russell 3000: there were 8 women CEOs added, representing 5.7% of total CEOs.
    • S&P 500: there were 5 women CEOs added, representing 6.4% of total CEOs. 

Disclosing the CEO’s ethnicity: just 1% of Russell 3000 companies provide this in proxy statements.

  • Russell 3000: In 2020, 98.9% of companies did not include in their proxy statements any information about the ethnic background of their CEO.
  • S&P 500: the same is true for 96.2% of these companies.

“The continued focus on diversity in upper management has yet to exhibit transformative gains in chief executive demographics," said Paul Hodgson, Senior Adviser at ESGAUGE. “While companies provide insight into gender diversity, and while disclosure about racial and ethnic diversity appears to be improving in the most recent corporate disclosures, the continued lack of full transparency prevents meaningful large-scale analysis of these trends. In another 12 months, with companies becoming more transparent on their diversity, equity, and inclusion efforts, that situation is predicted to change.”

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About The Conference Board

The Conference Board is the member-driven think tank that delivers trusted insights for what’s ahead. Founded in 1916, we are a non-partisan, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States.

About The Conference Board ESG Center

The ESG Center at The Conference Board serves as a resource, platform, and partner to help Member companies address their priorities in corporate governance, sustainability, and citizenship.

About Heidrick & Struggles

Heidrick & Struggles (Nasdaq: HSII) is a premier provider of global leadership advisory and on-demand talent solutions, serving the senior-level talent and consulting needs of the world's top organizations. In our role as trusted leadership advisors, we partner with our clients to develop future-ready leaders and organizations, bringing together our services and offerings in executive search, diversity and inclusion, leadership assessment and development, organization and team acceleration, culture shaping and on-demand, independent talent solutions. Heidrick & Struggles pioneered the profession of executive search more than 65 years ago. Today, the firm provides integrated talent and human capital solutions to help our clients change the world, one leadership team at a time.® 


ESGAUGE is a data mining and analytics provider, uniquely designed for the corporate practitioner and the professional service firm seeking customized information on US public companies. It focuses on disclosure of environmental, social, and governance (ESG) practices such as executive and director compensation, board composition and organizational policies, CEO and NEO profiles, proxy voting and shareholder activism, and CSR/sustainability disclosure. Our clients include business corporations, asset management firms, compensation consultants, law firms, accounting and audit firms, and investment companies. We also partner on research projects with think tanks, academic institutions, and the media. 



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