After three years of relative stability in the corner offices of corporate America, 2012 is shaping up as a year of CEO musical chairs. That’s because a wave of executives are looking to step down, cash in their stock options as stocks rise and avoid new government regulations that many see as too challenging and stressful.
Yet, all of this managerial turbulence could shape up to be a blessing in disguise for job seekers and mid-and-lower level workers, corporate governance experts say. Executive changes often spur a domino effect of jobs opening up at multiple levels of the company after many CEO’s decide to bring in new players, said Mark Madden, Senior VP of Executive Search with B.E. Smith, one of the nation’s largest health care C-suite recruiters.
In particular, the revolving door is spinning faster among health care and financial services executives, who are jumping ship, retiring, or being forced out at a quicker clip than their counterparts in other industries. Last month, 25 health care CEOs and 13 financial services CEOs departed, making those sectors the two biggest culprits of the rising turnover tide.
A growing push from the federal government to police the financial services industry and clamp down on executive compensation is prompting the exodus of CEOs in the financial services industry, said Don Hambrick, a professor at Penn State’s Smeal School of Business who consults for financial services firms. This includes Dodd-Frank, the new Consumer Financial Protection Bureau. In the aftermath of the financial crisis, many financial chief executives reasoned that lending and business volume would return to normal once the crisis abated. “But by this point, the guys I speak with are beaten down…so with compensation on a tight leash, instead of slogging along in an industry whose best days are behind them, many are just deciding to play golf now, and sit on a board or two,” he said.
Hospital executives, too, are increasingly stepping down and moving into contract consulting work as President Obama’s signature health care law’s provisions start taking effect. “We’re seeing a growing number of executives kind of throw up their arms and say, ‘I’ve gone through major changes in health care, and I’m not really in a position where I want to go through this major change again,” Madden said.
At the same time, corporate boards are looking increasingly for new blood to steer companies past crisis mode – and their current CEOs can take a hint. Until now, boards in virtually all industries have avoided shuffling their executives, while executives themselves who might have otherwise wanted to retire or switch jobs held off either out of allegiance to seeing the company through a rough patch or fear that life at another company could be worse, said Matt McGriel, a principal at Crist|Kolder Associates, a CEO search firm.
“The devil you know is often better than the one you don’t. Your company may be in a bad situation, but the one you’re going to may be even worse, was how many executives were thinking,” McGriel said. “But those fears are starting to dissipate, and there’s definitely going to be greater volatility with top executives coming and going in the coming months.”
The number of CEOS who left their posts in January spiked by 48 percent over December, rising to 123 – the highest level since May 2010 according to data from outplacement service firm Challenger, Gray & Christmas. Fifty-one percent resigned or stepped down, 26 percent retired, and only 9 percent left to take other jobs. Last month’s high-profile CEO resignations include Wayne Gattinella, WebMD, who stepped down after the healthcare information services provider slashed its revenue outlook twice during 2011, and Fannie Mae's Michael Williams, who is stepping down amid increasing criticism for helping spur the housing market collapse and collecting billions in taxpayer bailout funds.
While changes at the top may unnerve some employees, rarely do CEO switches bring about mass terminations of existing employees, he said. Instead, CEO churning often translates into strategy changes “which often creates some real opportunities for people lower down the food chain to be promoted in the new order of things,” McGriel said.