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UK companies increasingly look externally for CEO recruits

UK companies appointed more chief executives (CEOs) from outside their companies in 2015 than ever before according to a global survey of CEO succession conducted by PricewaterhouseCoopers (PwC).

The study which tracks CEO  succession in 2,500 publicly listed companies, including 300 in the UK, showed that over half (58%) of all CEO appointments to UK companies in 2015 were external hires. This is a record high for the UK since the study started in 2004 and much higher than the four year average of 40%.

The trend in the UK is not matched by the global norm which shows that CEO appointments are generally internal – only 23% of companies globally appointed an external hire as CEO last year. The survey also shows that looking outside the company has not necessarily brought success to UK businesses. While globally  external hire CEOs have delivered  higher total shareholder returns over the past three years the opposite is true in the UK, where external CEO hires are underperforming their internal peers.

The study also found that over the last four years, nearly three in ten (29%) external CEOs who left the company were forced out in the UK, compared to only two in ten (19%) of internal CEO hires. Excluding CEOs that left via M&A, four in ten external CEOs in the UK were forced out compared to just 23% of internally-promoted CEOs. CEO turnover is also at a record high in the UK, at 19.3% in 2015 (2014: 18.3%). Only Brazil, Russia, India and Japan had a higher CEO turnover rate than the UK last year.

Ashley Unwin, UK consulting leader at PwC, said, “Hiring a CEO from outside the company used to be seen as a last resort. That is not the case anymore, as UK companies are making more external CEO hires than ever before.

“The high proportion of external CEO hires in the UK who are then subsequently pushed out of the company raises concerns that UK companies’ succession planning is falling short.”

The research reveals that women are still underrepresented at the highest level companies globally with just 10 out of 359 incoming CEOs  being women. In the UK  two women were appointed to the CEO position in the past year out of a potential of 44 roles (4.5%). This is down from five out of 47 CEO appointments in 2014 (10.6%). Globally, just . However, this is the third year in a row that there has been at least one incoming woman CEO in the top 300 UK companies.

What do you think?