Why do top executives leave companies? It’s personal, MU study finds

Information could help prevent turnover of highly valued employees

May 28th, 2019

COLUMBIA, Mo. – In a new study, researchers at the University of Missouri have called attention to the importance of several types of disruptive events that contribute to top executives leaving companies.

Termed “shocks,” these employment-related events may be threats to a company’s reputation (such as lawsuits against the firm) or changes in the relationships an executive has at the company (such as CEO succession or departure of other top executives). In the study, each type of shock significantly increased the likelihood of an executive’s departure. For businesses experiencing turmoil, these findings could help them better respond to the needs of their employees and predict when executives are likely to leave.

In contrast to previous research that has focused on CEOs and company wide factors that drive departures, the study sought to identify the impacts of events that affect non-CEO executives on an individual level. While both “shocks” increased the likelihood of a departure, pay level helped determine which individuals were more likely to leave.

“If we want to know why executives leave, voluntarily or involuntarily, we have to understand how people interpret and respond to disruptive events, not just companies,” said Joel Andrus, an assistant professor of management in MU’s Trulaske College of Business. “This study provides companies with more information about why executives leave, especially after a ‘shock’ event.”

The shocks observed in the study had crucial differences in their impact depending on the executive’s level of pay. For higher-paid management, the departure of a fellow executive was less likely to cause a departure, which Andrus attributed to their elevated status among co-workers. In the case of a reputational shock, however, the effect was reversed: higher pay made an unplanned exit more likely.

“Higher-paid executives are perceived as highly skilled and have an easier time finding a new job,” Andrus said. “When a company’s reputation is damaged, a person might seek to preserve their standing in the job market by finding a position at a new company. For those who are paid less, the prospect of finding employment elsewhere can be more difficult and risky.”

The study, “Go your own way: Exploring the causes of individual top executive turnover,” was published in the Strategic Management Journal, which is consistently rated as one of the top management journals in the country. Michael C. Withers, Stephen Courtright and Steven Boivie of Texas A&M University also contributed to the study.