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  Companies are setting higher standards of performance for chief executive officers than ever before, and CEOs are falling short in record numbers, according to the second annual survey of CEO turnover at the world's 2,500 largest publicly traded corporations released today by Booz Allen Hamilton.
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Despite the high-profile management flameouts in the US, CEO turnover is accelerating faster in Asia and Europe than in North America. In Europe, the rate of CEO changes has increased in each of the five years the study examined since 1995. In 2002, 28 per cent of all CEO successions occurred in Europe. North America accounted for 48 per cent of all successions worldwide in 2002, significantly lower than the 64 per cent it accounted for in 2001.

Regionally, the biggest change occurred in the Asia/Pacific region, which accounted for nearly one of every five (19 per cent) global succession events, compared with 8 per cent in 2001 and 6 per cent in 2000. Forced turnover in Asia accounted for 45 per cent of all transitions there, up from only 6 per cent in 2001.

Involuntary successions in 2002 increased by 70 per cent over 2001- 39 per cent of all CEO changes globally were forced, performance-based changes, compared to 25 per cent in 2001.

These results underscore the growing influence of shareholders and their representatives, corporate directors, the Booz Allen study concludes. Boards of directors are now exercising their power on behalf of shareholders with a vigour unseen in modern times.

Boards are judging CEO underperformance more strictly. Chief executives who were dismissed in 2002 generated median regionally-adjusted shareholder returns 6.2 percentage points lower than CEOs who retired voluntarily. It took an 11.9 per cent shortfall to prompt a firing in 2001; in 2000, fired CEOs underperformed retiring chiefs by 13.5 per cent.

CEOs appointed from outside the company are a high-stakes gamble. Outsiders excel early, outperforming insiders by nearly 7 percentage points in the first half of their tenures. In the “second semester,” when most CEOs endure a slump, outsiders underperform insiders by 5.5 percentage points.

By failing to live up to their early promise, outsider CEOs are at greater risk of being fired than insiders. In 2002, more than half of all turnover of CEOs originally appointed from outside the company were forced changes; for inside appointments, only 44 per cent of all changes were involuntary.

Booz Allen studied the 253 CEOs of the world's 2,500 publicly-traded corporations who left office in 2002, and evaluated both the performance of their companies and the events surrounding their departure. To provide historical context, Booz Allen evaluated and the compared this data to information on CEO departures for 1995, 1998, 2000 and 2001.
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