Chief execs last only three years on average

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The Independent Online

Business "fat cats" might be lambasted for excessive pay but their job security has decreased significantly over the last few years, new research shows.

Business "fat cats" might be lambasted for excessive pay but their job security has decreased significantly over the last few years, new research shows.

The rate of turnover of chief executive officers at leading global companies rose by more than 50 per cent in 2001 compared with six years earlier.

According to Egremont Group, a consultancy firm, the average tenure for a CEO had shrunk to less than three years by the end of 2001, compared with almost four years in 1999.

As a result more than half of all global CEOs have been in post for less than three years, three-quarters for fewer than five years and just 12 per cent for more than a decade.

Egremont said the shorter lifespan for CEOs was driven by investors, who in the past would sell the stock if they were dissatisfied with the management but were now likely to press the board to axe the chief executive.

It said one in six of institutional investors had called for a CEO to be sacked in the last year, while in the UK a quarter of investors claim to have actively contributed to a CEO's departure.

Investors claimed their decisions were based on the decline in the company's financial performance and the lack of confidence they had in the CEO.But Simon Burke, chairman and CEO of Hamleys, the British toy retailer, said: "Too often the City makes little or no distinction between an underperforming CEO and an underperforming company."

Egremont said that while six out of 10 investors said they got rid of the CEO to improve financial performance, the axe-wielding did not achieve the required result. Analysis of 16 US companies that hired a new CEO last year showed their share price has since fallen on average by 13 per cent.

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