The boss’ office may still have wood-paneled walls and a killer view, but it is increasingly fitted with a trapdoor.
A record number of U.S. corporate chiefs were fired, retired or died this year, according to data released Friday.
The numbers reflect stock option scandals, an increase in corporate acquisitions and closer scrutiny of executives by their boards, said John Challenger, chief executive of outplacement firm Challenger, Gray & Christmas, which compiled the report.
Among the high-profile casualties this year was Bruce Karatz, who retired last month as chief executive of Los Angeles-based KB Home amid a probe of inflated stock option grants. Other CEOs to leave in the wake of option scandals were UnitedHealth Group Inc.'s William McGuire and Affiliated Computer Services Inc.'s Mark King.
A total of 1,347 CEOs at U.S. companies left during the first 11 months of the year, compared with 1,322 who exited in all of 2005, the study found.
“The options backdating scandal is spreading like a virus,” taking down 15 CEOs in the last two months, Challenger said.
But backdating of options, which inflates their values, is only one explanation for the revolving door, Challenger said.
Private equity firms and hedge funds on buying sprees are demanding superior corporate performance and dumping executives when they don’t get it, he said. And boards of directors, increasingly acting as the shareholders’ watchdog, “are much quicker to take action,” he added.
CEOs at Pfizer Inc., Bristol-Myers Squibb Co. and Viacom Inc. were ousted amid discontent with their performance.
There’s more turmoil to come, said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp. Top executives at Gap Inc. and Wal-Mart Stores Inc. are under pressure, he said. Any executive whose company stumbles “could be in the cross hairs,” Kyser said.
U.S. corporate bosses aren’t the only ones whose jobs have become more precarious. Last month, the resignations of chief executives at Deutsche Telekom and Volkswagen rocked the normally staid German corporate world. Analysts cited shareholder discontent and stiffer competition as prompting the departures.
Nationally, the biggest turnover occurred this year in the healthcare and computer industries, the Challenger study said.
But don’t feel sorry for most of these bosses. Although the flooring in the executive suite may not be as firm as it once was, generous severance payouts and retirement benefits often cushion the fall for ousted CEOs. Karatz, for example, left KB Home with as much as $175 million in severance pay, pension benefits and stock options, according to regulatory filings.
Ousted Viacom Chief Executive Tom Freston will be paid as much as $84.8 million in severance and other compensation over three years, regulatory filings show.