By: Caralee Adams

May 17, 2004, Crain's Chicago Business

To some, it’s a sign of hope; to others, a reflection of tough times.

Eight of the Chicago area’s 25 largest public companies—Boeing Co., Kraft Foods Inc., Motorola Inc., Caterpillar Inc., McDonald’s Corp., Baxter International Inc., Navistar International Corp. and R. R. Donnelley & Sons Co.—have hired new CEOs since CRAIN’s last published its annual ranking of public companies.

Throw in Dennis FitzSimons, who became CEO of Tribune Co. in January 2003; David Bernauer, who got the top job at Walgreen Co. in January 2002; Glenn Tilton, named CEO of UAL Corp in September 2002; Patrick Moore, named CEO of Smurfit-Stone Container Corp. in February 2002; C. Steven McMillan, who became Sara Lee Corp.’s CEO in July 2000, and Alan Lacy, tapped as CEO of Sears, Roebuck and Co. in October 2000, and you’ve got more than half of the area’s 25 biggest companies turning over leadership since the turn of the century.

“We’ve gone through a long down time in the economy and lots of nervousness. Now, everyone is waking up and finding the deck chairs rearranged,” says Paul O’Connor, executive director of World Business Chicago, a public-private economic development organization.

Executive-suite shakeups are becoming commonplace. About 20% of all Fortune 700 CEOs have been in their current position for one year or less, according to a 2004 report by Spencer Stuart, a global executive search firm in Chicago.

The average CEO tenure in Fortune 100 companies is about six years. Fewer top executives are staying long -term: Five years ago, 22% of Fortune 100 CEOs had been with their company for more than 35 years, compared with 10% of today’s roster.

With change comes uncertainty. That’s why the market generally reacts negatively to succession announcements, says Edward Zajac, professor of management and organizations at Northwestern University’s Kellogg School of Management. The reaction is worse when a company is less forthcoming about the reasons for the change.

So, what do these new faces mean for Chicago?

“It’s healthy in a sense,” says Mr. Zajac. “There are new people coming into Chicago. It’s more of a positive infusion of new blood in the area.”

Some say the CEO turnover reflects an improving economy. Companies are moving from an austerity mode to one of growth, and thus seek new leadership, says John Challenger, CEO of Chicago outplacement firm Challenger Gray & Christmas Inc. “They are looking for a different kind of CEO—someone who is visionary, someone who can move the company for-ward.”

When the market is down and a company’s stock is not performing well, there tends to be a lot of CEO turnover, says Eitan Goldman, assistant professor of finance at the Kenan-Flagler Business School at the University of North Carolina. “To some extent, these companies are trying to find a fall guy,” he says. “They want to be seen as doing something active.”