What CEO Departures Say About the Economy

When executives stop leaving their companies, the boom is over

By Stephen Mihm

The past few months have seen CEOs departing companies at a record clip — faster than any point in the past 17 years. These include the embattled executives heading up WeWork and Juul, making it seem as though there must be some kind of collective housecleaning taking place in corporate America.

That’s not the case. The evidence suggests that, a few high-profile exceptions notwithstanding, CEOs are leaving voluntarily. And this should command our attention: Historical patterns indicate that when we see this rate of turnover, the economic expansion is almost certainly in its final inning.

CEO turnover doesn’t hold constant over time. It ebbs and flows rather dramatically. In periods of peak turnover, as much as 20% of all executives leave per year; the troughs are as low as 8% or 9%.

It’s tempting to think that this pattern must have something to do with the business cycle. In other words, when the economy goes south, profits nosedive, investors squawk and the poor schlub in the C-suite gets the boot. But that’s not what happens at all. In fact, it’s the precise opposite: Turnover rates closely track the larger economy.

In other words, the employment rate for the nation’s business leaders is actually the opposite of ordinary employees. As the economy booms, CEOs leave their jobs at ever-increasing rates precisely as workers are moving with greater frequency into newly opened positions within these same companies. The more the economy booms, the more CEOs seem inclined to retire.

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