Global findings. 2016 CEO Success study

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Global findings

2016 CEO Success study

March 2017 Briefing document

Findings are confidential and

under embargo until 00:01

GMT on May 15, 2017

Strategy& | PwC Global findings_2016 CEO Success study.pptx

CEO accountability

2016 incoming class of CEOs

2016 outgoing class of CEOs

Methodology

March 2017 1


Executive summary

March 2017 2

In the last five years, forced turnovers for ethical lapses rose from 3.9% of all CEO successions

to 5.3%, a 36% increase.

At the largest companies in the U.S./Canada and Western Europe, the share of CEOs forced out of office for ethical

lapses increased 68% from 4.6% to 7.8%

• The share of CEOs forced out of office for ethical lapses increased in every region we analyzed:

• U.S./Canada: 1.6% to 3.3% – 102% increase

• Western Europe: 4.2% to 5.9% – 41% increase

• BRIC Countries: 3.6% to 8.8% – 141% increase

CEO ACCOUNTABILITY

We believe five major shifts have created the new era of CEO accountability:

• Public opinion: Since the financial crisis of 2007-08 and the Great Recession that it ignited, the public has become

more suspicious, more critical, and less forgiving of corporate misbehavior.

• Governance and regulation: The rise of public criticism of executives and corporations has translated directly into

regulatory and legislative action, and companies in the U.S. and many other countries have moved to a zero-tolerance

approach toward bad behavior in the C-suite.

• The business operating environment: Companies are increasingly pursuing growth in emerging markets where

ethical risks are heightened, and relying on extended global supply chains that increase counterparty risks.

• Digital communications: The use of email, text messaging, and social media has created new risks for ethical

lapses. A company’s digital communications can provide irrefutable evidence of misconduct, and their existence

increases the likelihood that a CEO will be held accountable.

• The 24/7 news cycle: Unlike in the 20th century, when most executives and companies could maintain a low public

profile, today the lightning-fast flow of Web-based financial news and data ensures that negative information travels

quickly and widely.


In the last five years, forced turnovers for ethical lapses rose from 3.9% of all CEO successions to 5.3%, a 36% increase

March 2017 3

Planned turnovers

Other forced turnovers

Ethical lapses1

2012-16

1,545

79.7%

15.0%

5.3%

2007-11

1,336

68.9%

27.2%

3.9%

2007-11

36%

2012-16

5.3%

3.9%

Global CEO turnover by type2007-16

Global share of CEOs forced out of

office for ethical lapses2007-16

1. We define an ethical lapse as a removal of the CEO as the result of a scandal or improper conduct by the CEO or other employees; examples include fraud, bribery, insider

trading, environmental disasters, inflated resumes, and sexual indiscretions.

Note: Exhibit excludes turnover events resulting from M&A and interim CEOs.

Source: Strategy& 2016 CEO Success study

CEO ACCOUNTABILITY


0.8%

1.8%

3.0%

4.6%

3.2%

2.4%

3.3%

7.8%

Third market cap quartileLargest market cap quartile2

+29%

+10% +313%

+68%

Smallest market cap quartileSecond market cap quartile

At the largest Western companies, the share of CEOs forced out of office for ethical lapses increased 68%

March 2017 4

Share of CEOs in U.S./Canada and Western Europe forced out of office for ethical

lapses1 by market cap quartile

2007-16

2012-162007-11

CEO ACCOUNTABILITY



2. Market cap quartile was based on company ranking in world’s 2,500 largest. Companies ranked 1,876–2,500 were in the smallest quartile. Companies ranked 1–625 were in the

largest quartile. Largest market cap quartile companies had a market cap value in 2016 of more than US$18.7 billion.




0.0%

2.2%

1.1%

2.7%

1.1%1.0%

3.5%

7.3%

+219%

+176%

Smallest market

cap quartile

Second market

cap quartile

-54%

Third market

cap quartile

Largest market

cap quartile2

At the largest companies in the U.S./Canada, the share of CEOs forced out of office for ethical lapses increased 176%

March 2017 5

Share of CEOs forced out of office for ethical lapses1 by market cap quartile

2007-16

2012-162007-11

CEO ACCOUNTABILITY

1.8%1.4%

8.7%

6.8%6.3%

4.3%

2.9%

9.6%

Largest market

cap quartile2

+213%

-67%

+256%

+41%

Smallest market

cap quartile

Second market

cap quartile

Third market

cap quartile

U.S./Canada Western Europe



2. Market cap quartile was based on company ranking in world’s 2,500 largest. Companies ranked 1,876–2,500 were in the smallest quartile. Companies ranked 1–625 were in the

largest quartile. Largest market cap quartile companies had a market cap value in 2016 of more than US$18.7 billion.




We believe five major shifts have created a new era of CEO accountability

March 2017 6

Neither our data nor perhaps any other data can show whether there’s more wrongdoing at large corporations today than in that past, but we doubt that’s the case, based on our own experience working with hundreds of companies over many years.

• Unlike in the 20th century, when most

executives and companies could

maintain a low public profile, today the

lightning-fast flow of Web-based

financial news and data ensures that

negative information travels quickly

and widely.

• Since the financial crisis of 2007–

08 and the Great Recession that it

ignited, confidence and trust in

large corporations and CEOs has

been declining; the public has

become more suspicious, more

critical, and less forgiving of

corporate misbehavior.

• The use of email, text messaging, and

social media has created new risks for

ethical lapses. A company’s digital

communications can provide irrefutable

evidence of misconduct, and their

existence increases the likelihood that

a CEO will be held accountable.

• The rise of public criticism of

executives and corporations has

translated directly into regulatory

and legislative action, and

companies in the U.S. and many

other countries have moved to a

zero-tolerance approach toward

bad behavior in the C-suite.

• Companies increasingly are (1) pursuing growth in emerging

markets where ethical risks, such as the possibility of bribery

and corruption, are heightened, and (2) relying on extended

global supply chains that increase counterparty risks.

CEO ACCOUNTABILITY


The share of CEOs forced out of office for ethical lapsesincreased in every region we analyzed

March 2017 7

CEO turnover by region2007-16

U.S./Canada

423

15.8%

80.9%

2012-16

3.3%

Other forced turnovers

2007-11

1.6%

Planned turnovers

366 Ethical lapses1

72.1%

26.2%

26.7%

3.6%

2012-16

69.7%

165

8.1%

8.8%

2007-11

83.2%

285

Western Europe Brazil, Russia, India,

China

More stringent governance regulation is one likely reason that

companies in the U.S./Canada have the smallest share of CEOs

forced out of office for ethical lapses. Nearly two thirds of U.S.

respondents to PwC’s Global Economic Crime Survey 2016, for

examples, agreed strongly that their organizations had a code of

conduct in place covering key risk/policy areas and setting out the

organizational values and behaviors expected of employees,

compared with 44% of respondents globally.

CEO ACCOUNTABILITY





More stringent governance regulation is one likely reason that

companies in the U.S./Canada have the smallest share of CEOs

forced out of office for ethical lapses. Nearly two-thirds of U.S.

respondents to PwC’s Global Economic Crime Survey 2016, for

example, agreed strongly that their organization had a code of

conduct in place covering key risk/policy areas and setting out the

organizational values and behaviors expected of employees,

compared with 44% of respondents globally.

309 303

63.4%

5.9%

2007-11

32.4%

4.2%

26.1%

2012-16

68.0%

102% increase,

from 1.6% to 3.3%


Joint chairman/CEOs were more likely to be forced out of office for ethical lapses than those who held a single title

March 2017 8

Share of CEOs in U.S./Canada and Western Europe forced out of office for ethical

lapses1 (as a percentage of all forced turnovers) 2012-16

44%

Joint chairman/CEOs forced out of office

24%

CEOs (no joint title) forced out of office

17%

Share forced out of

office for ethical lapses

CEO ACCOUNTABILITY






CEOs forced out of office for ethical lapses had longer median tenures than CEOs forced out for other reasons

March 2017 9

Median tenure of CEOs in U.S./Canada and Western Europe leaving office by reason2007-16

One possible explanation is

that companies with long-

serving CEOs tend to be those

that have been achieving

above-average financial

results, and thus may attract

less shareholder and media

scrutiny than companies that

have been performing poorly.

Another is that when an

organization’s leadership is

static, employees may begin to

see ethical lapses as normal,

and allegations of misconduct

are less likely to be raised,

investigated, or acted on.

CEO ACCOUNTABILITY

4.8

6.5

7.8

Median tenure (years)

CEOs exiting

via planned

succession

CEOs forced

out of office for

other reasons

CEOs forced

out of office for

ethical lapses1






The most important force for preventing ethical lapses is your corporate culture

March 2017 10

An effective culture must clearly state the company’s values of ethics and integrity, but it also needs to ensure that every team — and every employee — understands the critical few behaviors that will enable them to embrace and live those values in the work they do every day. To reinforce those behaviors, the company’s organizational ecosystem must address the underlying conditions that are always present when employees engage in illegal or unethical acts.

CEO ACCOUNTABILITY

Source: Framework borrows from Donald Cressey’s classic 1950 conception of the “Fraud Triangle,” which identified the three elements necessary as precursors to fraud as

Opportunity, Rationalization, and Pressure.

Organizational and

external influences

Leadership style, compensation

structure, incentives, and

internal/external pressures

Business processes

Weak business processes or a lax

system of controls creates an

opportunity for unethical behavior

Individual ethical

decision making

Process through which individuals

make decisions and rationalize

behavior to their personal code of

ethicsCulture of

integrity


How to create a culture of integrity

March 2017 11

Organizational and external Influences:

• Recognize if you have a “command and control” culture. Are you inadvertently encouraging bad conduct?

• Insist on an open-door policy. Are you encouraging your managers and employees to raise issues that trouble them in informal dialogue — rather than on formal occasions such as performance reviews?

• Consider whether you need structural reform. If your company has an excessively purpose-driven culture that reflects a strong or charismatic CEO modeling the wrong approach, do you need a stronger infrastructure at the board level to act as a check and balance?

Business processes:

• Determine your unique threat profile. Are you aware of the full range of potential threats that exist in places you operate or plan to operate, and the political and economic climate in those places?

• Take a close look at your existing compliance program. Are your current controls sufficient to mitigate the threats across all operations?

• Assess your employee reporting systems. Is there an employee hotline or similar feedback mechanism in place for employees to ask questions or discreetly report issues — and if so, are your employees aware of it?

Individual ethical decision making:

• Clarify your communications strategy. Is the compliance and ethics messaging from the top clear and consistently understood across the organization, and is the messaging and training frequent enough and adapted to local languages and cultural nuances?

• Drive engagement from the top. Are the leaders’ behaviors consistent with what they say in their communications? Are senior leaders and managers reinforcing messages about ethical conduct by engaging with their direct reports and staff?

• Don’t go it alone. Do leaders and managers have access to informed advice?

CEO ACCOUNTABILITY


CEO accountability



Methodology

March 2017 12


Executive summary

March 2017 13

The global CEO turnover rate fell from its record high of 16.6% in 2015 to 14.9% in 2016.

• Removing CEO turnovers due to M&A, the global share of planned turnovers reached 81%.

• Global CEO turnover was primarily driven by high turnover in the BRIC countries, Japan, and Western Europe.

• For the first time in the last five years, telecom did not have the highest CEO turnover rate.

The global share of incoming women CEOs increased to 3.6%.

• The share of incoming women CEOs in the U.S./Canada rebounded to 5.7% after falling for the previous three years.

• The U.S./Canada had the highest share of incoming women CEOs globally, followed by China.

• Five industries (healthcare, industrials, IT, consumer staples, and telecom) did not have a single incoming woman CEO in 2016.

– The healthcare industry has not had a single incoming woman CEO in the last five years.

Only 18% of incoming CEOs in 2016 were company outsiders compared with the five-year trend of 23%.

• Almost every region and industry had a smaller share of incoming outsider CEOs compared with its five-year trend.

Globally, 10% of incoming CEOs also held the position of chairman.

The share if incoming CEOs with international work experience is decreasing; it was down to 24% in 2016 from 45% in 2012.

2016 INCOMING CLASS OF CEOS


The global CEO turnover rate fell from its record high of 16.6% in 2015 to 14.9% in 2016

March 2017 14

CEO turnover rate by succession reasonCEO turnover events as a percentage of top 2,500 public companies


9.1%

6.3%

5.0%

10.9%10.1%

10.3%11.2%10.8%

9.8%

7.7%7.2%6.7%

9.2%

7.8%

5.3%6.0%6.4%

2.6%3.4%3.6%

3.0%2.8%

4.5%

2.4%1.9%

2.2%

2.2%

5.1%

4.2%4.6%

3.2%4.4%2.4%

3.4%

2.6%

1.4%

1.4%

2.4%

2.1%

2.8%

1.2%1.5%2.2%2.2%

2.9%3.4%

0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

14.4%

(359)

2005

15.4%

(386)

2004

14.7%

(367)

2.4%

2003

9.8%

(244)

1.3%

2002

10.8%

(270)

2001

14.2%

(354)

2000

12.9%

(323)

3.2%

2014 2015

16.6%

(416)

M&A

2016

14.9%

(372)14.3%

(357)

2013

14.2%

(355)

2012

15.0%

(375)

20112010

11.6%

(290)

1.8%

2009

Turnover Rate

14.3%

(359)

1.8%

10.9%

(272)

2008

14.4%

(361)

2007

13.8%

(345)

2006

Planned turnover

Forced turnover



The global rate of planned turnovers increased slightly but remained under 70% for a second straight year

March 2017 15

CEO succession reasons as a percentage of turnover events2000-16



49%56%

46%

54% 53%

60%

44%48% 50%

64% 66%69% 72% 71%

78%

65%

26%

22% 41%

32%31%

23%

32%30%

35%

24% 19% 15%

18% 19%

13%

18%16%

25% 22%

13% 14%17% 17%

24% 21%15% 13% 15% 16%

10% 10% 9%

17% 14%

69%

290

2009

359

Forced turnover

M&A

2016

372

2015

416

2001

272

2000

323 359

2005

386

2004

367

2003

244

2002

270

2012

375

2011

354

2010

Planned turnover

2008

361

2007

345

2006 2014

357

2013

355


Removing CEO turnovers due to M&A, the global share of planned turnovers reached 81%

March 2017 16

CEO succession reasons as a percentage of turnover events2000-16


65%72%

53%

63% 63%

72%

58%61% 59%

73%78%

82% 80% 79%86%

78% 81%

35%28%

47%

37% 37%

28%

42%39% 41%

27%22%

18% 20% 21%14%

22% 19%

321

2008

307

2007

272

2011

299

2012

339

2014

326

2003

211

2006

273

2004

306

2010

246

2001

211

2000

243

2009

314

2013

318

2002

234

2005

347

Forced turnover

Planned turnover

319

20162015

Note: Exhibit excludes turnover events resulting from M&A.



Global CEO turnover was primarily driven by high turnover in the BRIC countries, Japan, and Western Europe

March 2017 17

CEO turnover rate by region and succession reason2016 CEO turnover events as a percentage of top 2,500 public companies in each region


1. "Other Mature" economies include Argentina, Australia, Bahrain, Chile, Czech Republic, Hong Kong, Hungary, New Zealand, Poland, and Korea.

2. “Other Emerging" economies include Egypt, Kazakhstan, Mexico, Nigeria, South Africa, Turkey, and Vietnam.

Note: "Mature" countries are defined as per the U.N. Development Programme 2015 ranking of countries with "very high human development" (human development index >0.80);

all others are "emerging“ countries.


Region Brazil,

Russia,

India

China Japan Other

Emerging

Other

Mature

U.S./

Canada

Western

Europe

Total

Number of companies in region 116 387 226 162 311 782 516 2500

10.4%

13.8%

11.1%

8.7%

13.4%

10.6%8.7%

11.7%

2.4%

3.4%

3.5%

3.7%

2.9%

2.0%

2.1% 2.9% 1.3%

3.5%

Planned turnover

Forced turnover

M&A

Other Emerging2

13.6%

0.6%1.2%

U.S./Canada

14.2%

Other Mature1

14.8%

China

15.2%

1.0%0.8%

Western Europe

15.3%

Japan

15.5%

0.9%

Brazil,

Russia, India

17.2%

0.0%

2016 Global

14.9%


CEO turnover declined in every region except the U.S./Canada

March 2017 18

CEO turnover rate by region and succession reason2011-16 CEO turnover events as a percentage of top 2,500 public companies in each region




Note: "Mature" countries are defined as per the U.N. Development Programme 2015 ranking of countries with "very high human development" (human development index >0.80);



0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

22%

24%

2011 2012 2013 2014 2015 2016

Turnover rate

Japan

Other Mature2

U.S./Canada

Western Europe

Brazil, Russia, India

China

Other Emerging1


A fifth of all utilities companies had a CEO turnover in 2016

March 2017 19

CEO turnover rate by industry and succession reason2016 CEO turnover events as a percentage of top 2,500 public companies in each industry


1. “Financial Services” includes real estate.

2. "Consumer Discretionary" includes automobiles and components, consumer durables and apparel, consumer services, media, and retailing.


Industry Consumer

Discretionary

Consumer

Staples

Energy Financial

Services

Healthcare Industrials Information

Technology

Materials Telecom

Services

Utilities Total

Number of companies in

industry366 200 143 537 199 377 270 191 87 130 2500

10.4%

15.4%

12.6%

10.0% 10.8%9.2%

10.5% 9.5%7.0% 6.8%

2.4%

2.1%

2.6%2.6%

2.3%1.6%

2.0%

3.0% 3.8%

2.1%

4.6%

1.4%3.0% 1.5%

2.3% 1.6% 2.0%3.0% 2.2%

13.0%

1.9%

1.6%

Planned turnover

Forced turnover

M&A

Industrials

16.4%

Consumer

Discretionary2

12.8%

Healthcare

13.1%

Consumer

Staples

13.5%

Materials

13.6%

Telecom

Services

13.8%

Financial

Services1

14.9%

Information

Technology

15.6%

Energy

16.1%

Utilities

20.8%

0.8%

2016 Cross

industry

14.9%


For the first time in the last five years, telecom did not have the highest CEO turnover rate

March 2017 20

CEO turnover rate by region and succession reason2011-16 CEO turnover events as a percentage of top 2,500 public companies in each region


0%

5%

10%

15%

20%

25%

2011 2012 2013 2014 2015 2016

Turnover rate




Telecom Services

Industrials

Financial Services2

Utilities

IT

Healthcare

Consumer Staples

Materials

Consumer Discretionary1

Energy


The global share of incoming women CEOs increased to 3.6%

March 2017 21

Global share of incoming women CEOs2004-16


3.6%

5.2%

4.3%

4.0%

3.4%

2.4%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

2.8%

3.0%

2.6%

3.5%

1.0%1.1%

2.1%

Note: Exhibit includes interim CEOs and turnover events resulting from M&A.



The share of incoming women CEOs in the U.S./Canada rebounded to 5.7% after falling for the previous three years

March 2017 22

Share of incoming women CEOs in the U.S./Canada2004-16


5.7%

4.0%

7.3%7.1%

5.2%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

1.1%

4.7%

6.2%

4.8%

2.4%

2.0%

2.7%

1.9%

Note: Exhibit includes interim CEOs and turnover events resulting from M&A.



The U.S./Canada has had the largest share of incoming women CEOs over the last five years

March 2017

0.6%

4.2%4.0%

2.5%

3.8%

4.6%4.6%

3.8%

0.0%0.0%

2.9%

4.8%5.0%

5.3%

5.7%

3.6%

Other Mature2Brazil, Russia, IndiaChinaU.S./Canada JapanOther Emerging1 Western EuropeGlobal

23

Share of incoming women CEOs by region2012-16


2012-16 2016



Note 1: "Mature" countries are defined as per the U.N. Development Programme 2015 ranking of countries with "very high human development" (human development index >0.80);


Note 2: Exhibit includes interim CEOs and turnover events resulting from M&A.



The healthcare industry has not had a single incoming woman CEO in the last five years

March 2017 24

Share of incoming women CEOs by industry2012-16

4.3%

2.9%2.4%

1.2%

0.0%

1.1%

3.1%

5.2%

7.6%

9.0%

3.8%

0.0%0.0%0.0%0.0%0.0%

4.0%

4.8%

5.4%

7.3%

13.6%

3.6%

Information

Technology

Consumer

Staples

Telecom

Services

IndustrialsHealthcareMaterialsEnergyFinancial

Services2

Consumer

Discretionary1

UtilitiesCross industry




Note: Exhibit excludes interim CEOs and turnover events resulting from M&A.


20162012-16


The median age for an incoming CEO was 53; incoming CEOs in Japan being the oldest (median age of 61)

March 2017 25

Incoming CEO median age (years) by region2016






Note 2: Exhibit excludes interim CEOs and turnover events resulting from M&A.


5051525354

55

61

5353

China Other

Emerging2)

Western Europe Other Mature1)U.S./CanadaJapan Brazil,

Russia, India

2012-16 Global 2016 Global


Only 13% of incoming CEOs in 2016 were foreigners

March 2017 26

Incoming CEO nationality by region2016


83% 87%

100% 100%94% 91% 89%

68%59%

6%8%

7%

27%

6%

10%5% 9% 5%

35%

6%0%

Brazil,

Russia, India

Other Mature1

0%

Western

Europe

56

Other

Emerging2

17

Different country, same region

Different country, different region

Same country

0%

287

2016 Global

35

U.S./Canada

17 75

3%

54

Japan

0%

33

0%

China

3%

1,406

2012-16 Global








China was the only region whose share of incoming company outsider CEOs was higher than its five-year trend

March 2017 27

Share of incoming company outsider CEOs by region2012-16








4%

17%

28%29%

18%

36%35%

23%

3%

13%

16%

21%22%

29%

32%

18%

U.S./Canada JapanWestern EuropeOther Emerging2ChinaBrazil, Russia, IndiaOther Mature1Global

2012-2016 2016


Almost every industry's share of incoming company outsider CEOs was lower than its five-year trend

March 2017 28

Share of incoming company outsider CEOs by industry2012-16

18%

36%

19%

25%

18%

25%

16%

29%

26%28%

23%

12%13%13%

16%16%16%17%

19%

26%26%

18%

Utilities HealthcareInformation

Technology

Financial

Services1

EnergyCross industry Consumer

Discretionary2

Materials IndustrialsConsumer

Staples

Telecom

Services






Five-year average 2016


Globally, 10% of incoming CEOs also held the position of chairman

March 2017 29

Share of incoming CEOs who held the joint title of CEO and chairman2000-16


9%

18%

26%

29%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

20162015

7%

2014

10%

20132012

12%

2011

14%

2010

13%

2009

12%

20082007

19%

200620052004

31%

2003

33%

2002

48%

2001

33%

2000

33%

Joint title share

10%

Global Average

Europe

China & Rest of Asia

Japan

North America




About a fifth of incoming CEOs had prior public CEO experience

March 2017 30

Incoming CEOs with previous public company CEO experience by region2016


17% 21%28% 27% 26%

21% 18%12% 9%

83% 79%72% 73% 74%

79% 82%88% 91%

Yes CEO experience

2012-16 Global

290

No CEO experience

Japan2016 Global China

54

Western

Europe

56

Other Mature

35

Other Emerging

19

U.S./Canada

76

Brazil,

Russia, India

171,473 33








The share of incoming CEOs with international work experience is decreasing, down to 24% in 2016

March 2017 31

Incoming CEOs with experience in different regions1 compared with company HQ region 2012-16


45%

35% 34%28%

24%

55%

65% 66%72%

76%

287

Has worked in other regions

280

2016

289

20152013

279

2014

Has not worked in other regions

299

2012

1. “Experience in different regions” means incoming CEOs have experience in regions other than company HQ region.




Incoming CEOs in Western Europe were most likely to have international work experience

March 2017 32

Incoming CEOs with experience in different regions1 compared with company HQ region 2016


1. “Experience in different regions” means incoming CEOs have experience in regions other than company HQ region.







33%

24%

47%41%

34%26%

15% 13%

67%

76%

53%59%

66%74%

85% 88%93%

7%

Has not worked in other regions

Has worked in other regions

1,436

2012-16 Global

1935

Other

Emerging3

Western Europe

17

Brazil,

Russia, India

55287

2016 Global Other Mature2 U.S./Canada

75

Japan

5432

China


Incoming CEOs in Japan were most likely to have stayed with one company for their entire career

March 2017 33

Incoming CEOs with previous experience in different companies1 by region2016


67%74%

89%84% 82%

77% 76%68%

33%

33%26%

11%16% 18%

23% 24%32%

67%

286 19

2016 Global

56

Other

Emerging2

76

Western

Europe

35

U.S./Canada Other Mature3

17

Brazil,

Russia, India

53

China Japan

30

Has not previously worked in other companies

Has previously worked in other companies

1,431

2012-16

Global

1. "Previous experience in different companies" means new CEO had worked at another company at any time before being named CEO at current company.








Globally, 36% of incoming CEOs had an MBA

March 2017 34

Incoming CEOs with an MBA by region2016








31%36%

56%

44% 42%35% 35% 34%

69%64%

44%

56% 58%65% 65% 66%

96%

52

China

35

Other Mature2

4%

24

Japan

No MBA

Yes MBA

2012-16 Global

1,373

Western Europe2016 Global

272 18

Other Emerging1

16

Brazil,

Russia, India

U.S./Canada

73 54


Over a quarter of incoming CEOs in China had a Ph.D.

March 2017 35

Incoming CEOs with a Ph.D. by region2016








10%

26%

11% 11% 9%

91% 90%

74%

89% 89% 91%96%

100% 100%

9% Yes Ph.D.

No Ph.D.

Japan

24

0%

Brazil,

Russia, India

16

0%

U.S./Canada

73

4%

Western Europe

55

Other Emerging2)

18

Other Mature1)

35

China

53

2016 Global

274

2012-16 Global

1,384


Introduction

CEO accountability



Methodology

March 2017 36


For the fourth straight year, outsider CEOs have delivered higher median total shareholder returns than insiders

March 2017 37

Median total shareholder returns1 by outgoing CEO pedigree2000-16

2016 OUTGOING CLASS OF CEOS

3%

5%5%4%4%

3%

4%

3%2%

1%

3%

5%5%

4%

1%0%

1%

11%

-1%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

Outsider

Insider

20162015

3%

1%

20142013

4%

2012

0%

2%

2011201020092008

-1%

2007

2%

2006

6%

4%

20052004

4%5%

2003

0%

20022001

0%

Regionally adjusted annualized TSR

2000

-3%

-5%

1. Total shareholder returns are annualized over outgoing CEOs' tenure and are regionally adjusted, meaning that performance is measured relative to a regional index (S&P 500,

Brazil Bovespa, FTSE 100, CAC 40, etc.).



CEO tenure in the U.S./Canada has been rising for the last five years

March 2017 38

Median tenure of outgoing CEOs by region2009-16

5.05.3

5.04.7

5.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

2009 2010 2011 2012 2013 2014 2015 2016

Years

4.8

Brazil, Russia, India/Other Emerging1)

Other Mature3

China2

Japan

Global

U.S./Canada

Western Europe

5.04.8


2. “China” included in “Brazil, Russia, India/Other Emerging” until 2013.





2016 OUTGOING CLASS OF CEOS


Introduction

CEO accountability



Methodology

March 2017 39


Methodology

March 2017 40

The CEO Success study identified the world’s 2,500 largest public companies, defined by their market

capitalization (from Bloomberg) on January 1, 2016. We then identified the companies among the top

2,500 that had experienced a chief executive succession event between January 1, 2016, and

December 31, 2016, and cross-checked data using a wide variety of printed and electronic sources in

many languages. For a listing of companies that had been acquired or merged in 2016, we also

used Bloomberg.

Each company that appeared to have changed its CEO was investigated for confirmation that a change

occurred in 2016, and additional details — title, tenure, chairmanship, nationality, professional

experience, and so on — were sought on both the outgoing and incoming chief executives (as well as

any interim chief executives). Company-provided information was acceptable for most data elements

except the reason for the succession. Outside press reports and other independent sources were used

to confirm the reason for an executive’s departure.

Finally, Strategy& consultants worldwide separately validated each succession event as part of the

effort to learn the reason for specific CEO changes in their region. To distinguish between mature and

emerging economies, Strategy& followed the United Nations Development Programme 2015 ranking.

Total shareholder return data over a CEO’s tenure was sourced from Bloomberg and includes

reinvestment of dividends (if any). Total shareholder return data was then regionally market adjusted

(measured as the difference between the company’s return and the return of the main regional index

over the same time period) and annualized.

METHODOLOGY

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Global findings. 2016 CEO Success study

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