The presence of activist investors — those that scoop up large numbers of shares and try to secure board seats — can double CEO turnover, according to study featured by Bloomberg Businessweek.
The study, conducted by advisory firm FTI Consulting, found CEO turnover accelerates even further when activist investors obtain board seats. An analysis of 2,500 companies shows the average 12-month CEO turnover rate is 16.6 percent, but the rate jumps to 28.4 percent when activist investors come into the picture — a 71 percent increase. When those activists gain seats on the board, 12-month CEO turnover rates hit 34.1 percent, according to the report.
Within 24-months, the presence of activists can increase CEO turnover 48 percent (from an average 30.9 percent without activists to 45.6 percent with activists). When activists gain board seats, 24-month CEO turnover hits 55.1 percent, according to the report.
The study suggests an activist investor's presence — and desire to spur change — may drive increased turnover at the top.
Read the full report here.
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