CRIST KOLDER ASSOCIATES Volatility Report 2014

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1 CRIST KOLDER ASSOCIATES Volatility Report 2014

2 CRIST KOLDER Volatility Report Table of Contents Page 3 Page 6 Page 7 Page 15 Page 24 Page 33 Report Methodology Report Highlights Executive Turnover C-Suite Career Paths Diversity Landscape Education Background 2

3 Methodology The annual Crist Kolder Volatility Report of America s Leading Companies examines the backgrounds and measures the turnover of C-Suite executives in a portfolio of 669 of America s leading companies from the Fortune 500 and the S&P 500 Indexes. Crist Kolder Associates examine each of the portfolio companies individually, noting personnel and organizational changes in the CEO, CFO, and COO roles. Each executive s background is explored, including the path taken to get to their current role: industry background, functional experience, and education. This includes demographic information such as age, gender, and race. This is the eleventh year of the Crist Kolder Volatility Report, though information for the report goes back to Data gathered for the Summer 2014 release of the Crist Kolder Volatility Report is through August 1, 2014 and includes projections, based on current and historical trends, through the end of the year. The Winter release of the 2014 Crist Kolder Volatility Report available in January, will have full data through December 31,

4 Methodology Notes 2014 Fortune 500 and S&P 500 Companies (669 Total) -Companies Removed: 40 -Companies Added: 41 -Public Companies: 641 -Private Companies: 28 Data tracked January 1, 1995 through August 1, 2014 Company Industry Breakdown Consumer 11% Technology 12% Industries broken down by Fortune's classification system and then grouped into designated larger categories based on SIC codes and judgment of Crist Kolder Associates. Energy 13% Services 11% Resources: Board Analyst: BusinessWeek: Capital IQ: Factiva: Fortune: GMI Analyst: Hoover s Online: Notable Names Database: Phone Conversations with Company Executives SEC Filings: Yahoo Finance: Financial 15% Healthcare 10% Industrial 18% Retail 10% 4

5 Definitions Volatility: Turnover is noted when the executive starts in the new role (as opposed to when it s announced). Internal change: An executive is promoted to a new role at the company where he/she is already employed. External change: An executive is recruited to a position at a company to which he/she has no formal ties. Mergers: In a merger of equals, the combined company is considered a new entity. A change in leadership, therefore, is marked for all mergers. A change is internal if the executive was previously employed by either of the merging companies. Acquisitions: In the event an executive from the acquired company is appointed to a role in the acquiring company, it is an external change. COO Definitions: COO Role: If no individual operates under the title of COO at a given company, description of duties, executive hierarchy, and compensation are simultaneously analyzed to determine if someone with another title (i.e. President) fulfills this role. CEO-COO: Should a COO be promoted to CEO, or an individual be simultaneously elected to both positions, the COO role is considered vacant since the functions of the COO are handled by the CEO. 5

6 Report Highlights The following are some of the highlights from this year s report: The number of female CEOs has nearly tripled in the last 10 years. (Page 29) The percent of female CEOs and CFOs continues to rise and is at an all time high. (Page 43) Over the past 10 years, the number of racially diverse CEOs has increased by over 100%. (Page 25) COO turnover is projected to rise, while CEO and CFO turnover are projected to drop. (Page 8) As the economy improves, CEO and CFO turnover trends are now moving in opposite direction of the S&P 500 Index. (Page 11) The elimination of the COO position has stabilized; 36% of companies in both 2013 and 2014 have COOs. (Page 14) International Universities have the highest number of CEOs by undergraduate degrees, while the Big Ten Conference leads the number of CFOs. (Pages 32 and 33) 6

7 Executive Turnover 7

8 COO turnover is projected to rise, while CEO and CFO turnover is projected to drop 30.0% CEO/CFO/COO Volatility ( ) 2014 Fortune 500 and S&P 500 (669 Companies; 670 Sitting CEOs; 664 Sitting CFOs; 245 Sitting COOs) 25.0% 20.0% Historical Average 20.8% 15.0% 10.0% 5.0% Historical Average 14.5% Historical Average 10.7% 0.0% * CEO 9.2% 9.5% 12.5% 11.7% 12.8% 15.3% 10.7% 9.5% 9.6% 11.6% 13.9% 10.6% 10.5% 11.3% 9.9% 7.9% 11.6% 9.4% 11.0% 8.5% CFO 12.6% 14.1% 18.1% 16.6% 16.1% 17.3% 14.8% 13.9% 12.5% 15.5% 15.0% 16.8% 17.3% 18.9% 12.3% 10.7% 11.6% 13.4% 15.8% 12.9% COO 19.1% 19.2% 28.0% 21.9% 24.1% 23.3% 20.3% 20.1% 20.7% 22.5% 22.4% 23.0% 19.6% 19.8% 18.8% 21.8% 20.8% 26.0% 17.0% 19.7% *2014 values are projected based on current year turnover rates through July

9 Half of total CEO turnover comes from the Energy and Industrial sectors 2014 CEO Volatility by Industry 2014 Fortune 500 and S&P 500 Companies (669 Companies) Consumer 5% Technology 8% Energy 26% Services 16% Notable CEO Changes in Ford Motor Company -- General Motors Corporation -- HCA Holdings, Inc. -- The Kroger Company -- Walmart Stores, Inc. Retail 11% Financial 5% Notable CEO Energy and Industrial Sector Changes in Ford Motor Company -- General Motors Corporation -- KBR, Inc. -- National Oilwell Varco, Inc. -- Raytheon Company Industrial 24% Healthcare 5% 9

10 There is a relatively high CFO turnover rate in the Healthcare and Industrial sectors (35%) 2014 CFO Volatility By Industry 2014 Fortune 500 and S&P 500 Companies (669 Companies) Energy 10% Consumer 6% Technology 10% Services 14% Notable CFO Changes in General Motors Corporation -- HCA Holdings Inc. -- International Business Machines Corporation -- Starbucks Corporation -- Wells Fargo & Company Financial 12% Notable CFO Healthcare and Industrial Sector Changes in 2014 Healthcare 17% Retail 14% -- 3M Company ---General Dynamics Corporation -- General Motors Corporation -- HCA Holdings Inc. -- Honeywell International Inc. -- Merck & Company, Inc. Industrial 17% 10

11 In 2014, as the S&P 500 Index advanced, the percentage of CEO and CFO turnover decreased Overall Volatility and S&P 500 Index* ( ) 2014 Fortune 500 and S&P 500 (669 Companies) 22.0% % % 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% % % ** S&P 500 Index CEO/CFO Turnover 11.4% 12.5% 16.3% 15.8% 15.3% 17.5% 13.9% 12.6% 11.2% 14.9% 16.1% 14.2% 15.2% 15.9% 12.4% 9.8% 12.2% 11.9% 13.2% 10.7% 0 *Average Daily Close ** Projected value for end of

12 CEO and CFO external recruitment is predicted to decrease from last year, while COO external recruitment is projected to remain on track Percentage of CEO/CFO/COO Recruited from Outside the Company ( ) 2014 Fortune 500 and S&P 500 Companies (669 Companies; 670 Sitting CEOs; 664 Sitting CFOs; 244 Sitting COOs) 60.0% 50.0% Historical Average 39.2% 40.0% 30.0% 20.0% 10.0% Historical Average 15.4% Historical Average 20.3% 0.0% * CEO External 11.8% 13.0% 19.2% 14.3% 20.8% 19.2% 20.9% 11.7% 16.4% 21.3% 20.7% 25.0% 18.1% 24.4% 24.6% 21.8% 21.0% 28.8% 34.6% 24.4% CFO External 44.1% 37.2% 36.9% 36.1% 35.8% 40.4% 31.5% 53.9% 34.6% 39.0% 33.3% 37.5% 42.7% 42.2% 43.5% 32.4% 41.3% 43.0% 42.7% 31.8% COO External 11.9% 17.4% 16.7% 0.0% 17.9% 25.4% 5.5% 25.0% 10.5% 12.7% 15.6% 10.5% 12.7% 18.6% 10.9% 11.3% 23.3% 19.7% 15.9% 13.7% *Projected value for end of

13 Industrial and Technology companies are less likely to have a COO in place, while over 50% of Services companies utilize the role Percentage of 2014 Companies with COO by Industry 2014 Fortune 500 and S&P 500 Companies (669 Companies; 244 Sitting COOs) 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Services Retail Financial Consumer Energy Healthcare Technology Industrial % with COO 50.6% 43.1% 37.6% 36.8% 34.9% 32.3% 31.6% 29.2% 13

14 The number of companies with a COO remained at 36% from 2013 to % Percentage of Companies with a COO ( ) 2014 Fortune 500 and S&P 500 Companies (669 Companies) 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% * % with COO 48.0% 44.7% 45.5% 44.9% 44.4% 43.9% 43.8% 46.0% 44.3% 42.2% 41.6% 41.5% 39.6% 36.3% 36.5% *As of August 1,

15 C-Suite Career Paths 15

16 Over 40% of all current CEOs come directly from the COO chair 45.0% Percentage of 2014 Sitting CEOs by Immediate Previous Position 2014 Fortune 500 and S&P 500 (669 Companies; 670 Sitting CEOs) 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% COO Divisional Operating CEO CFO Founder Other Interim President Executive % From Position 43.3% 19.6% 10.8% 10.7% 6.2% 5.5% 3.3% 0.6% Operating Executive: President, Group President, VP/SVP/EVP Operations CEO: Internally recruited CEOs a result of mergers Other: i.e. Government Role, Private Equity, Management Consulting, Chairman 16

17 Internally promoted CEOs tend to come from the COO chair, while externally hired CEOs are usually recruited from another CEO role 2014 Sitting CEO Immediate Previous Role, Internal vs. External 2014 Fortune 500 and S&P 500 (669 Companies; 670 Sitting CEOs) 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% COO CEO Divisional Operating Founder CFO Other President Executive Internal 51.2% 3.8% 18.9% 9.6% 6.9% 6.7% 2.9% External 16.4% 35.6% 22.6% 15.8% 0.0% 4.8% 4.8% CEO: Internally recruited CEOs a result of mergers Operating Executive: President, Group President, VP/SVP/EVP Operations Other: Tax, Law, IT, etc. 17

18 Over 55% of externally hired CFOs are recruited directly from another CFO chair 60.0% Immediate Prior Position of 2014 Sitting CFOs Internal vs. External 2014 Fortune 500 and S&P 500 (669 Companies; 664 Sitting CFOs) 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% CFO Controller Operating Executive Treasurer Corporate Finance Executive Strat/MA Other Divisional Finance Officer Consulting Risk Executives Investor Relations Internal 5.7% 24.1% 18.6% 16.5% 15.0% 6.0% 5.5% 4.8% 0.7% 1.4% 0.5% 1.2% External 55.7% 7.0% 11.5% 2.5% 3.7% 6.6% 4.1% 4.9% 2.0% 0.4% 1.6% 0.4% CFO: CFO of another company Operating Executive: President, Group President, VP/SVP/EVP Operations Corporate Finance Executive: VP, SVP, EVP of Finance Strat/MA: Investment Banking, Corporate Development, Planning or Strategy Other: Tax, Law, IT, etc. Executives: CEO, COO 18

19 Over 40% of all sitting CFOs came directly from a CFO or Controller chair Percentage of 2014 Sitting CFOs by Immediate Previous Position 2014 Fortune 500 and S&P 500 (669 Companies; 664 Sitting CFOs) 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% CFO Controller Operating Executive Treasurer Corporate Finance Executive Strat/MA Other Divisional Finance Officer Consulting Risk Executives Investor Relations % From Position 24.1% 17.8% 16.3% 11.3% 11.0% 6.2% 4.5% 4.7% 1.2% 1.1% 0.9% 0.9% CFO: CFO of another company Operating Executive: President, Group President, VP/SVP/EVP Operations Corporate Finance Executive: VP, SVP, EVP of Finance Strat/MA: Investment Banking, Corporate Development, Planning or Strategy Other: Tax, Law, IT, etc. Executives: CEO, COO 19

20 The CFO position is the only executive position with external hires in each sector in 2014 External Hires by Industry 2014 Fortune 500 and S&P 500 Companies (669 Companies; 670 CEOs; 664 CFOs; 244 COOs) 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% CEO CFO COO Consumer 0% 5.56% 50% Energy 28.57% 11.11% 25% Financial 14.29% 16.67% 0% Healthcare 0% 27.78% 25% Industrial 42.86% 5.56% 0% Retail 0% 22.22% 0% Services 0% 5.56% 0% Technology 14.29% 5.56% 0% 20

21 The Industrial sector leads in existing CEOs with CFO experience 25.0% Percentage of Sitting CEO with CFO Experience by Industry ( ) 2014 Fortune 500 and S&P 500 (669 Companies; 670 Sitting CEOs) 20.0% 15.0% 10.0% 5.0% 0.0% Industrial Services Financial Energy Retail Technology Consumer Healthcare % with CFO Experience 24.4% 17.1% 14.6% 12.2% 9.8% 9.8% 7.3% 4.9% 21

22 Nearly 30% of the 664 sitting Fortune 500 and S&P 500 CFOs have public accounting backgrounds 2014 CFOs with Public Accounting Backgrounds (196 CFOs) 2014 Fortune 500 and S&P 500 Companies (669 Companies; 664 Sitting CFOs) PwC Ernst and Young Deloitte Arthur Andersen KPMG Multiple Firms * Other ** *Multiple firms indicates that the individual has been employed with more than one public accounting firm. This includes Arthur Andersen, Deloitte, Ernst and Young, KPMG and PwC **Other includes BDO and an unspecified Big 4 firm 22

23 For the first time in our study of Fortune 500 and S&P 500 CFOs, over 10% have investment banking backgrounds Top 5 Firms for 2014 CFOs with Investment Banking Backgrounds (69 CFOs) 2014 Fortune 500 adn S&P 500 Companies (669 Companies; 664 Sitting CFOs) Merrill Lynch* Goldman Sachs** JP Morgan*** Citigroup**** Lehman Brothers***** Morgan Stanley *Two CFOs have worked for both Bank of America and Merrill Lynch and one CFO has worked for both Citigroup and Merrill Lynch **One CFO has worked for both Bank of American and Goldman Sachs ***One CFO has worked for both Allen and Company and JP Morgan ****One CFO has worked for First Boston, Lehman Brothers and Citigroup, one CFO has worked for both Merrill Lynch and Citigroup and one CFO has worked for both Schroeder and Co. and Citigroup *****One CFO has worked for First Boston, Lehman Brothers and Citigroup 23

24 Diversity Landscape 24

25 The number of CEOs who are women has nearly tripled in the last ten years Number of Companies with a Female CEO by Industry ( ) 2014 Fortune 500 and S&P 500 Companies (669 Companies; 670 Sitting CEOs) Consumer Energy Financial Healthcare Industrial Retail Services Technology Total Female CEOs

26 The number of CFOs who are women has doubled in ten years 90 Number of Companies with a Female CFO by Industry ( ) 2014 Fortune 500 and S&P 500 Companies (669 Companies; 664 Sitting CFOs) Consumer Energy Financial Healthcare Industrial Retail Services Technology Total Female CFOs

27 Female presence at the CEO/CFO level continues to rise and is at an all time high Percentage of 2014 Female CEOs and CFOs from Fortune 500 and S&P 500 Companies (669 Companies; 670 Sitting CEOs; 664 Sitting CFOs) 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% % Female CEOs 1.8% 1.6% 2.1% 2.2% 2.0% 2.7% 2.5% 3.2% 3.7% 4.5% 4.8% % Female CFOs 6.6% 7.8% 8.0% 8.5% 8.6% 9.6% 8.8% 10.1% 10.8% 10.7% 11.4% Total % Female Executives 8.4% 9.4% 10.1% 10.8% 10.6% 12.2% 11.3% 13.4% 14.5% 15.2% 16.2% At current rate, it will take until 2165 for the number of Female Executives to reach 50% of the 669 Fortune 500 and S&P 500 Companies. In other words, it will take nearly 150 years. 27

28 On average, Female CEOs, CFOs and COOs are more likely to hold an MBA than their male counterparts 60.0% Percentage of 2014 Female Executives versus Male Executives with MBAs 2014 Fortune 500 and S&P 500 Companies (669 Companies; 32 Female CEOs; 78 Female CFOs; 14 Female COOs) 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% CEOs CFOs COOs Female 43.8% 55.3% 50.0% Male 42.3% 50.7% 33.9% 28

29 Over the past ten years the number of racially diverse CEOs has increased by over 100% 45 Number of Companies with Racially Diverse CEOs ( ) 2014 Fortune 500 and S&P 500 (669 Companies; 670 Sitting CEOs) Asian/Indian African American Hispanic/Latino Total Diverse CEOs

30 The number of racially diverse CFOs has increased significantly in the past 10 years 35 Number of Companies with Racially Diverse CFOs ( ) 2004 Fortune 500 and S&P 500 (669 Companies; 664 Sitting CFOs) Asian/Indian African American Hispanic/Latino Total Diverse CFOs

31 The Technology sector has the greatest number of racially diverse CEOs Number of Companies with Racially Diverse CEOs by Industry ( ) 2014 Fortune 500 and S&P 500 Companies (669 Companies; 670 Sitting CEOs) Consumer Energy Financial Healthcare Industrial Retail Services Technology Total Diverse CEOs

32 The Technology sector also has the greatest number of racially diverse CFOs Number of Companies with Racially Diverse CFOs by Industry ( ) 2014 Fortune 500 and S&P 500 Companies (669 Companies; 664 Sitting CFOs) Consumer Energy Financial Healthcare Industrial Retail Services Technology Total Diverse CFOs

33 Education Background 33

34 International Universities have currently produced the most sitting CEOs CEO Undergraduate University Conference Affiliation 2014 Fortune 500 and S&P 500 Companies (669 Companies; 660 Known CEO Education Backgrounds) International Ivy League Big 10 Pacific 12 ACC SEC Big East Big 12 Mid- Patriot American League Number of CEOs

35 69 CEOs from Fortune 500 and S&P 500 companies received their undergraduate degrees outside of the United States. 65% come from these Top 5 Countries Top 5 International Degree Producing Countries 2014 Fortune 500 and S&P 500 Companies (669 Companies; 69 International Degree CEOs) England Canada India France Australia Number of CEOs

36 The Big Ten has produced the most sitting CFOs and the University of Illinois, Champaign- Urbana has produced the most of any institution CFO Undergraduate University Conference Affiliation 2014 Fortune 500 and S&P 500 Companies (669 Companies; 618 Known CFO Education Backgrounds) Big 10 ACC International Pacific 12 Big East Ivy League Big 12 SEC Mid- Patriot American League Number of CFOs

37 44 CFOs from Fortune 500 and S&P 500 companies received their undergraduate degrees outside of the United States Top 5 International Degree Producing Countries 2014 Fortune 500 and S&P 500 Companies (669 Companies; 44 International Degree CFOs) Canada England France Australia Germany Number of CFOs

38 Over 33% of CEOs and over 68% of CFOs have an Undergraduate Degree in Business Undergraduate Degrees of Sitting CEO/CFOs 2014 Fortune 500 and S&P 500 Companies (669 Companies; 508 Known CEO Undergraduate Majors; 486 Known CFO Undergraduate Majors) 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% CEO CFO Business* 33.9% 68.5% Engineering 27.2% 7.2% Liberal Arts** 24.2% 18.9% Sciences 10.6% 3.9% Dual 4.1% 1.4% *Accounting, Business Admin/Management, Finance, Other (Marketing, etc.) **Economics is included in Liberal Arts 38

39 Over 40% of CEOs with business-related undergraduate degrees majored in Business Administration/ Management, while over 50% of CFOs with business-related undergraduate degrees majored in Accounting Business Degrees by Major of Sitting CEO/CFOs 2014 Fortune 500 and S&P 500 Companies (669 Companies; 508 Known CEO Undergraduate Majors; 486 Known CFO Undergraduate Majors) 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% CEO CFO Business Admin/Management 42.2% 26.5% Accounting 28.3% 51.2% Finance 18.2% 20.5% Other 11.2% 1.8% 39

40 Over 50% of Industrial sector CEOs have completed their education through the MBA level Degree Level of Sitting CEOs 2014 Fortune 500 and S&P 500 Companies (669 Companies; 660 Known CEO Education Backgrounds) 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Consumer Energy Financial Healthcare Industrial Retail Services Technology Bachelors 33.8% 38.8% 27.7% 25.0% 33.1% 61.9% 36.0% 36.8% MBA 40.5% 31.8% 49.5% 42.2% 50.8% 20.6% 42.7% 40.8% Advanced Degree* 14.9% 29.4% 21.8% 31.3% 14.4% 15.9% 20.0% 19.7% No Degree 10.8% 0.0% 1.0% 1.6% 1.7% 1.6% 1.3% 2.6% *i.e. MS, MA, PhD, MD, JD, etc. 40

41 Over 60% of Retail sector CFOs have completed their education through the MBA level Degree Level of Sitting CFOs 2014 Fortune 500 and S&P 500 Companies (669 Companies; 618 Known CFO Education Backgrounds) 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Consumer Energy Financial Healthcare Industrial Retail Services Technology Bachelors 53.6% 35.8% 36.3% 41.0% 34.8% 39.6% 36.8% 27.3% MBA 40.6% 53.1% 54.9% 49.2% 57.1% 60.4% 52.9% 59.7% Advanced Degree* 5.8% 11.1% 8.8% 9.8% 8.1% 0.0% 10.3% 13.0% No Degree 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% *i.e. MS, MA, PhD, MD, JD, etc. 41

42 Of the 285 CEOs who hold MBAs, almost 20% completed their MBA degree at Harvard University Top 5 CEO Attended Universities for MBAs 2014 Fortune 500 and S&P 500 Companies (669 Companies; 660 Known CEO Education Backgrounds) Harvard Stanford Northwestern University of University of University University University Pennsylvania Chicago Number of CEOs

43 Of the 341 CFOs who hold MBAs, 10% completed their MBA at the University of Chicago Top 5 CFO Attended Universities for MBAs 2014 Fortune 500 and S&P 500 Companies (669 Companies; 618 Known CFO Education Backgrounds) University of Harvard Northwestern Columbia New York University of Chicago University University University University Pennsylvania Number of CFOs

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