Overture Institute

Executive Tenure

The New Look of Executive Tenure

There has been a major demographic shift due to baby boomers retiring from the workforce. With this large sector that holds a number of executive level positions exiting the market, companies now have to sit up and pay attention to executive retention. 55% of executives have worked for 2-3 organizations at the executive management level and only around 44% will stay with their current company for 2-5 years. The following factors contribute to an executive’s decision to leave their company:

 

  • Poor Company Values/Culture
  • Dissatisfaction with Leadership of Senior Management
  • Lack of Career Advancement Opportunities
  • Inadequate Compensation and Benefits Package

It has been found that the majority of senior-level executives are very willing to make a career transition if the right opportunity came along. Many companies are offering large incentives including training and opportunities for growth within their businesses. Along with increases in CEO compensation, executive tenure is now a trending incentive from companies to get their employees to stay. There are two key reasons CEO pay increases along with tenure:

  1. The longer a CEO stays with a company, the more their experience and skills will amount to better performance.
  2. A CEO’s likelihood of searching for other opportunities outside their current position becomes slim when a CEO receives higher pay.

 

Fortune’s own CEO data indicates that the 500 largest companies in the U.S. have a median CEO tenure of 4.9 years. It is often common that although longer tenured CEOs do get paid more, their current compensation packages are similar to those offered to recently hired CEOs (Equilar). Knowing that a major demographic shift is occurring from one generation to the next, it appears that companies are making these additional offers of tenure and higher compensation to avoid frequent CEO turnover. There are steep transition costs to replace a CEO which could be motivating companies to be planning ahead and not only find the perfect candidate but also retain them based on their performance. A lead search firm like ours will find you the ideal candidate that will become a long-term asset to your company, contact us today!

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