CEO exits among Russell3000 companies in the “normal course” of business average just north of 21% on a rolling 2-year basis.

But CEO exits skyrocket when an activist gets involved.

According to a new study by Strategic Governance Advisors (SGA), a subsidiary of FGS Global,  when activist investors obtained board seats at R3000 companies, the rate of CEO change over the subsequent two years more than doubled. 

It has become rare for an activist to explicitly campaign on a platform of CEO change. But the data suggest that once on the board, activists take a more direct approach to achieving that end.

In 2021, post-activism CEO turnover reached a high of 56%. And even when the activist does not win board seats, the CEO turnover rate often increases by more than 50%, to a rate in the low- to mid-30’s on a two-year rolling basis. 

  • Among the most prolific activists, more than one-third of the 34 companies at which Starboard launched campaigns experienced CEO change within two years. With Elliott, Land & Buildings and Carl Icahn, near-term CEO-exit rates were also much higher than baseline.
  • Among the most aggressive activists with at least five campaigns in the sample, rates of near-term CEO change ranged from 42% for Elliott to as high as 75% of the companies targeted by Engaged Capital.
  • Even among the 201 “one-time” activists in the sample, 30% of the companies targeted had CEO turnover within 2 years.

Shareholder activism – even if “unsuccessful,” but particularly when it results in an activist gaining board seats – can have significant implications for a company’s leadership. Boards need to consider these implications in communicating to investors and developing a strategy for responding to activism.