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4/11/04
TURNOVER Retirements and an upswing in the economy may be key factors in an increase in the turnover of chief executives last month. CEO departures were up by 43 percent, said Challenger, Gray & Christmas, an outplacement firm. In all, 73 CEOs left their jobs in March, up from the 51 departures announced by US firms in Feburary. In January, 50 employers reported that their CEOs were leaving. ''A growing number of companies are transitioning from a business strategy focused on surviving the economic slump to one that stresses expansion and innovation," said John Challenger, chief executive of the Chicago firm. ''The change in direction could prompt many boards to decide that new leadership is necessary." Challenger estimates that the average departing CEO spent about 9.7 years on the job before his or her resignation this year, up from 5.9 years in 2001. Back then, the unstable economy and declining stock market led to even more corporate uncertainty and a shareholder backlash against CEOs who failed to execute, causing the ouster of a number of chief executives. Today, however, the position appears to be more stable. Still, Challenger said, chief executives are facing more scrutiny these days as shareholders and boards attempt to exert greater control over their actions. The desire for tighter control comes after the high-profile business scandals involving top executives at Tyco International Ltd., Enron Corp., and WorldCom, among others. As a result of those scandals, corporate boards aren't taking any chances. Failure to satisfy the demands of officers and shareholders can spell trouble for chief executives. Take Michael Eisner, CEO of Walt Disney Co. Last month, he was stripped of his chairmanship after 43 percent of the media company's shareholders withheld their votes for his reelection, signaling their displeasure with his performance. The company gave the title of chairman to board member George Mitchell. Eisner is still chief executive. Disney is not the first to divide the roles of chairman and chief executive. Separating the roles of chief executives and chairmen is a standard practice in Europe, said Tom Wamberg, chairman and CEO of Clark Consulting. He believes the practice is gaining momentum in the United States. ''Shareholders view it as an important step in improving corporate governance," he said. Others bid their CEOs goodbye. For example, pharmaceutical firm AaiPharma recently announced the resignation of CEO Philip Tabbiner following an inquiry by the board into the company's unusually high sales growth in 2003. And Coca-Cola has announced that Doug Daft, chairman and chief executive officer, will retire at the end of the year. The announcement comes at a time when the Atlanta-based bottling and beverage firm's stock has declined, its bottled water is being pulled out of stores in England because of concerns about its purity, and the Securities and Exchange Commission is probing its business practices. For some companies, the change in chief executives signals the passing of an era. On March 25, for example, William Haseltine, founder and chief executive of Human Genome Sciences, a pharmaceutical and research firm in Maryland, announced that he planned to retire. Haseltine had served 12 years in the top position. He said in a statement that the company needed a different kind of CEO to take it to the next level. He also said that he would help select his replacement. ''I have asked the board of directors to assist me in searching for and appointing a new CEO with demonstrated skills in late-stage product development, manufacturing, and pharmaceutical sales and marketing, precisely the skills needed to leverage the company's strong product portfolio and financial assets," he said. In his study of last month's CEO departures, Challenger found most chief executive turnover took place in sectors that are experiencing a rebound. For example, about 71 percent of the changes took place in the financial and technology sectors as well as healthcare and services. In all, the service sector reported that 14 chief executives departed last month, the highest number of departures in one sector, Challenger said. The sector with the least turnover? The retail sector, with two departures. Twenty-nine of the companies reporting CEO departures gave unspecified reasons for the change, and 20 said that their CEOs retired. The two findings were the top reasons for departures. One company reported that its CEO was replaced. ''It is not unusual for a company to change leadership as it moves from one phase of its operations to another," said Challenger. ''In many cases, it is necessary."
WORKPLACE EXPANSION A Swedish study published in The Lancet, the British health journal, reports that large staffing increases can harm workers' health. The study found that rapid workplace expansion is closely associated with increased risk of long-term sickness, particularly among women in the public sector. Women in that sector who were exposed to a big staffing increase every year over a six-year period, starting in 1991, had two to three times the risk of a long-term absence of 90 days or more due to illness than those who had never been exposed to such increases, the study said. The Lancet said prior reports about workers' health and workplace change had focused on the negative impact of downsizing. But Hugo Westerlund of Sweden's National Institute for Psychosocial Medicine reported an unexpected finding when he and his colleagues reviewed personnel changes that had taken place at Swedish firms between 1991 and 1996. When the researchers reviewed absenteeism rates among the employees, they found that repeated exposure to large staffing increases -- those involving an increase in the number of employees by 18 percent or more yearly -- could cause a rise in long-term illnesses, hospital admissions, and absenteeism. Exposure to moderate staff increases resulted in a decreased risk of hospitalization, the study said. The study also reported that moderate downsizing can also have a negative impact on the health of the employees who remain in the workplace after the cuts end. The researchers also looked at the impact of staffing increases on 24,000 Swedish employees who were under 65 and healthy, with good employment records. -- DIANE E. LEWIS
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