Asia-Pacific may rank low when it comes to being home to world's 500 biggest companies, but the region has seen the highest rate of CEO departures among the 500 global corporate giants, a new study reveals.
In the first nine months of 2007, the Asia-Pacific recorded a CEO turnover of 16.4 per cent as 20 of the region's 122 companies present in the Fortune 500 list saw their business heads moving out.
Among 122 Asia-Pacific companies in the Global 500 list, India accounted for six -- Indian Oil Corp, ONGC, Reliance Industries, HPCL, BPCL and SBI. Public sector energy giant ONGC also saw a new chief R S Sharma assuming office this year.
According to a study on CEO departures by global public relations firm Weber Shandwick, the turnover rate for Asia-Pacific's CEO turnover among the 500 largest global companies is higher than European, North American and Latin American counterparts.
The turnover rate of 6.7 per cent for North American CEOs was less than half the Asia-Pacific rate. The Asia-Pacific rate was also higher than 12.6 per cent in Europe. Latin America has just 10 companies among world's 500 biggest, and saw a turnover rate of 10 per cent with one resignation.
As against Asia-Pacific's 122 companies among the world's top 500, North America and Europe had a higher participation of 178 and 190 respectively. There were 12 departures in North American and 24 from European firms.
However, when it comes to CEOs being ousted from these companies, the Asia-Pacific rate was lower than Europe and North America. The Asia-Pacific saw four CEOs being ousted with a rate of 20 per cent as against three sackings in North America with 25 per cent rate and nine forced exits in Europe with a 37.5 per cent rate.
Overall, 28 per cent of chief executives who left office in the first three quarters of 2007 exited involuntarily. In Asia-Pacific, CEOs buck this trend with the number of ousted CEOs falling by half in 2007.
"These statistics reveal growing disparity between North American and European/Asia Pacific CEO tenures. While North American CEOs appear to be enjoying somewhat more job security than ever before, European CEOs in particular are new facing greater reputation pressure to perform or pay the price," Weber Shandwick's chief reputation strategist Leslie Gaines-Ross said.
In 2006, the rate of turnover for Asia-Pacific CEOs was 15.5 per cent, while in Europe and North America it was 9.3 per cent and 8.7 per cent, respectively.
European CEOs were also more likely to be pressured to leave their jobs than their regional counterparts. While only two European CEOs were forced out of office by the end of the third quarter in 2006, nine European CEOs exited involuntarily during the same time period, the study revels.
"Continued CEO turnover among the largest companies in the world, coupled with an uncertain economy could signal trouble ahead regardless of region. CEOs now face unprecedented scrutiny with little flexibility for forgiveness," it said.
To avoid surprises, it is imperative that companies not only perform well but also effectively communicate with their key shareholders, board, employees, media and other stakeholders as transparently as possible, the study added.