Turnover at the Top: Are Boards Ready?

Boards are facing a potentially daunting challenge: an upsurge in executive turnover that could deprive companies of vital, experienced talent at a time of pivotal change. That was the finding of a newly published survey of nearly 200 U.S. public company board members conducted by Corporate Board Member and Farient Advisors.

According to the data, 64 percent of respondents expect to lose a member of their C-suite in the next two years, and 57 percent reported having already experienced some level of voluntary turnover. Understanding what level of talent is at risk can help companies and boards take action to prevent premature departures, notes Farient Founder and CEO Robin Ferracone. The research indicates that the CEO’s direct reports are most at risk of leaving in the view of respondents (67% affirmed this), followed by executives one or two levels below the CEO’s direct reports (50%), employees below the executive level (17%), and the CEO themselves (11%).

Furthermore, the study shows more than 80 percent of survey participants selected “creating a strong company culture” as contributing to retention of their top C-level talent—with 74 percent saying the same for the CEO. This shows that boards need to be concerned about culture overall as a retention lever throughout the organization—including when it comes to CEO and other executive pay metrics. Some examples of big companies that have embedded culture metrics into their pay programs are included in the research. By rewarding CEOs for pursuing positive corporate culture goals, these companies have enabled a top-down approach to culture that helps maintain talent at multiple levels below the C-suite.

Even with recognition of the importance of culture, however, compensation itself remains a key motivator. The majority of directors (70 percent) expressed willingness to offer a special retention award to retain a top executive performer even if it meant risking a negative say-on-pay vote. Finally, the research validates the importance of building a “deep bench” of talent with high opportunity for promotion and succession plans that draw on existing staff to fill leadership roles. This encourages talent retention, says the survey.

Explore the findings and implications of the CBM/Farient research below.