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U.S. companies are removing their CEOs at the fastest clip in two decades, data shows, as increased scrutiny from shareholders and boards result in reduced tolerance for sub-par returns or wayward conduct.
At least 41 CEOs have exited S&P 500 companies so far this year, compared with 49 for all of 2024 – making the fastest pace on an annualized basis since 2005, according to data from nonprofit executive research group The Conference Board and data analytics company ESGAUGE.
In the latest example, consumer goods company Procter & Gamble, the maker of Tide laundry detergent and Bounty paper towels, said on Monday CEO Jon Moeller will be replaced next year by longtime executive Shailesh Jejurikar. Moeller, who has been CEO since 2021, will become executive chairman, a powerful role on the board that allows the former chief to retain a strong voice in company affairs.
Before that in the last three weeks alone Tylenol-maker Kenvue replaced its CEO and health care products distributor Henry Schein said its CEO will leave at year’s end.Â
In interviews, more than a dozen executive recruiters, investors, bankers, lawyers and industry advisers attributed the high turnover this year to a range of reasons, some building up from economic and social changes since the Covid-19 pandemic.
While high inflation, geopolitical instability and the Trump administration’s trade war has complicated the job of CEOs, diversity gains made boards more independent and demanding of the person in the top job, these people said.
At the same time, in a stock market setting new records but driven mostly by large tech names, underperformance had given activist investors, who push for corporate changes from selling a division to buying back more stock, greater sway, leading to management changes.
“Trying to fire the CEO has become a referendum on what’s perceived to be a failed company strategy,” said Peter da Silva Vint, managing partner at consulting firm Jasper Street, which works with companies facing pressure from activist investors. “And investors have become more comfortable with it as a mechanism to send a message.”
CEOs at companies that are lagging their peers are most at risk for demands from activists, with almost half – 42% – of S&P 500 companies that changed leaders last year foundering in the bottom 25th percentile for total shareholder returns, according to a November study led by The Conference Board.
Take the case of Kenvue, where the board said it was replacing CEO Thibaut Mongon “to unlock shareholder value and reach its full potential” after the stock had lost 16.5% since its spin out from Johnson & Johnson two years ago. In contrast the S&P 500 has climbed 41% since August 2023, when Kenvue became a fully independent company.
Kenvue took action after three U.S. hedge funds — Starboard Value, Tom’s Capital and Third Point – agitated for change at the company, and Starboard CEO Jeffrey Smith got a board seat in March to settle that hedge fund’s proxy fight.
The battle at Kenvue continues, however. The other two funds continue to agitate for more changes, including divesting assets and possibly selling the entire company, according to people familiar with the matter. With a new CEO on board investors, are confident a sale is sure to follow, the sources said.
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Kenvue declined to comment, Mongon could not be reached for comment and the hedge funds did not respond to requests for comment.
“Activist investors are feeling more empowered, and if they have bought into a company’s five-year plan then they want someone to exercise it,” said Georgetown University professor Jason Schloetzer, an expert in corporate governance. “And if the guy at the top can’t do it, they’ll find the next one.”
Beyond shareholder activism and performance, changes in the makeup of boards over the past decade when there had been a new focus on adding diversity was also playing a role in the shakeup at the top, corporate governance experts said. Such boards were acting with greater independence, putting CEOs on tighter leash, these people said.
“Newer members have more objectivity relative to prior generations,” said Jason Baumgarten, head of global board and CEO practice at executive recruitment firm Spencer Stuart.
Another factor in the high CEO turnover: less tolerance of unethical behavior, especially after the #MeToo movement. Questions over personal conduct led to the departure of at least two of the 40 CEOs at S&P 500 — at Kroger and Kohl’s. Representatives for the companies did not respond to requests for comment and the former executives could not be reached for comment.
But the trend goes beyond publicly traded companies as well.
Earlier this month, Andy Byron, the married CEO at privately held technology company Astronomer, left his position after a video of him embracing the firm’s human resources chief Kristin Cabot, who is not his wife, at a Coldplay concert went viral. Astronomer did not respond to a request for comment and Byron could not be reached.
Reputational risk and corporate culture have become central to a company’s long-term value, Jasper Street’s da Silva Vint said. “Today’s boards are far more willing to act decisively, removing executives, not only to enforce policy, but to protect shareholder, employee and public trust,” he said.
(Reporting by Svea Herbst-Bayliss and Isla Binnie, Editing by Dawn Kopecki.)
