According to a new report by The Conference Board, the exceptional longevity of the bull market that followed the Great Recession appears to have stretched leadership tenures at large U.S. public companies, resulting in a higher average CEO age.

The study, CEO Succession Practices: 2018 Edition, developed in collaboration with Heidrick & Struggles, annually documents and analyzes chief executive officer succession events of S&P 500 companies, updating a historical database first introduced in 2000. In 2017, there were 54 CEO succession cases among S&P 500 companies.

In 2009, at the peak of the Great Recession, the typical CEO of an S&P 500 held his or her position for 7.2 years—the shortest average tenure ever reported by The Conference Board. However, CEO tenure started to rebound soon after, rising to 10.8 years by 2015. In 2017, departing CEO tenure was the highest recorded since 2002, at nearly 11 years. Consistent with this evidence, in 2017 the average age of a sitting S&P 500 CEO was 58.3 years, more than two years older than the average CEO in 2009.

"CEO succession planning is among the most challenging tasks required of the board of directors, with important implications on the organization, its employees, and culture," said Matteo Tonello, Managing Director of Corporate Leadership at The Conference Board and a co-author of the report with Jason D. Schloetzer, Professor at Georgetown University's McDonough School of Business. "Our findings suggest that a new generational change in the top business leadership may be underway. Boards of directors should therefore be aware of the possible increase in demand for top talent and have a sound CEO succession plan in place to retain a competitive advantage over their peers."

A related finding from the research study is the dramatic widening of the gap between CEO exits from better-performing companies and under-performing ones. The succession rate of better-performing companies declined to 6.8 percent in 2017, the lowest since 2002 and much lower than the average of 9.4 percent calculated for the entire 2001-2017 period. By way of comparison, in 2017 the succession rate for better performing companies was more than three times lower than the 22.1 percent registered for underperforming companies. "In today's governance and investment climate, CEOs who achieve better performance benefit from even greater job stability while underperforming CEOs are even more exposed to public scrutiny. Such scrutiny may ultimately limit the discretion that the board of directors can exercise to keep the underperformer," said Schloetzer.

Other key findings from the report:

• Today's incoming CEOs are in the early to mid-fifties, and the appointment of executives aged 60 or older has become quite uncommon. In 2017, out of 54 newly announced CEOs in the S&P 500, only four were in their 60s and two in their 70s. In the same time period, there were 10 appointments of CEOs in their 40s and 26 new CEOs in the 50-55 age group. Among S&P 500 companies, only 10 CEOs are aged 73 or older.

• Amid shifting consumer demand and the steady decline of the department store model, the retail and wholesale trade sector had the highest rate of CEO succession. In 2017, among S&P 500 companies, the CEO succession rate was 10.8 percent, in line with a historical average of 10.9 percent. However, the industry analysis shows that, among retail and wholesale trade companies included in the index, the CEO succession rate was more than twice as high, at 22.7 percent. Similarly, the trade sector reported, by far, the highest percentage of disciplinary successions, or 38.5 percent. The same analysis showed that the rate of CEO succession among S&P 500 manufacturing companies almost doubled, from 7.9 percent in 2016 to 14 percent in 2017. The explanation for these findings should be sought in the concerns about the underperformance of manufacturing stocks in the 2015-2016 period (where the US Institute for Supply Management's Purchasing Managers Index dropped more than 10 points in less than a year, from a peak of 59 in 2015 to 47 in 2016, or the sharpest decline since 2008) as well as the aptly named "retailpocalypse" that has been affecting department stores and other trade businesses besieged by the Amazon behemoth.

• Embattled by disrupting competition and changes in the consumer market, in 2017 many boards of directors trusted an outsider to deliver organizational shake-ups and a new strategic direction. An exceptionally high number of companies that changed their CEO in 2017 chose to appoint an outsider to the top leadership role. These findings represent a clear break from the past, as the 14.3 percent rate of outside successions documented for 2015 and 2016 surged to 44.4 percent in 2017. The remaining 55.6 percent were "insiders," having served more than one year with the company. A look at the list of outside CEO appointments for the year reveals a common trait. Many of those companies are in embattled business sectors, such as manufacturing and retail—penalized over the years by outsourcing practices, innovative technology, and disruptive competition. Some have underperformed their peers, failing to intercept shifting consumers' needs. Others have struggled to innovate and remain relevant. In these circumstances, boards of directors executing their responsibility of delivering shareholder value, often choose to bring in outside talent groomed in a different business culture to help navigate sharp strategic corrections or accelerate organizational changes. Examples include H&R Block, Tiffany & Co, Mattel, Kellogg, and Chipotle Mexican Grill.

• Whether to audition or groom the new leader, or to manage a lengthier transition, the board chose to appoint an interim CEO in almost 2 out of 10 CEO successions in 2017. Gradual transitions have become more common, and so has the option to appoint interim CEOs. While in each of the last two years, approximately 10 percent of CEO succession events involved an interim appointment, the rate increased to 18.5 percent in 2017. This has happened, for example, at CSX Corp in response to the sudden death of its CEO; at Equifax in the wake of its major cybersecurity breach; and at Autodesk after a period of having two co-interim CEOs. In these and other cases, the length of service for interim CEOs ranged from less than one month to eight months, with four boards ultimately offering the permanent position to the executive serving in the interim. Previously used mainly in situations of emergency, the practice no longer necessarily reveals shortcomings in the planning process or the need to indefinitely prolong the search for a successor. Instead, it can be implemented for a variety of reasons: to audition the person who is already expected to become permanent CEO; for the interim to groom the eventual candidate to the position; or to better manage the public relations aspects of a lengthier leadership transition.

• While gender diversity continues to be elusive at the helm of the largest US public companies, the number of CEO positions held by women in the S&P 500 in 2017 rose to the highest level recorded by The Conference Board. Seven female CEOs left the S&P 500 in 2017: They are Meg Whitman of Hewlett Packard Enterprise, Irene Rosenfeld of Mendelez, Ursula Burns of Xerox, Marissa Mayer of Yahoo!, Gracia Martore of Tegna Inc., Debra Crew of Reynolds American, and Shira Goodman of Staples (Goodman in fact stepped down in early 2018, but Staples was dropped from the index in 2017, together with Yahoo!, Tegna, and Reynolds American). These departures were countered by eight new additions: seven newly appointed female CEOs (Adena Friedman of Nasdaq, Gail Boudreaux of Anthem Inc., Michele Buck of Hershey, Michelle Gass of Kohl's, Margaret Georgiadis of Mattel, Geisha Williams of PG&E, and Virginia Drosos of Signet Jewelers) and the addition to the S&P 500 of Advanced Micro Devices, which is led by CEO Lisa Su. As a result, the total number of S&P 500 companies with a female chief executive rose to 27 in 2017, from the 26 seen in 2016. It is the highest level ever recorded by The Conference Board in its 17-year review of CEO succession practices. However, it also underscores the degree to which gender parity remains elusive in corporate leadership: if the rate of increase in female representation in the CEO community were to continue at the 2001-2017 level, there would still be fewer than 100 women CEOs of S&P 500 companies in 2034.

CEO Succession Practices was made possible by a research grant from executive search and leading advisory firm Heidrick & Struggles. "As advisors to top CEOs and leadership teams around the world, we see first-hand how disruption can be both a threat and an opportunity. Thoughtful and proactive succession planning can help boards mitigate risk and prepare for a wide range of scenarios. The latest report findings suggest that succession planning will become even more critical as nearly every industry faces the threat of disruption. In response, S&P 500 companies are increasingly turning to external talent to fill CEO roles," said Jeff Sanders, Vice Chairman and Co-Managing Partner of the CEO & Board Practice, Heidrick & Struggles. "Heidrick & Struggles is proud to support research providing data and analysis around how companies are addressing leadership changes and accelerating C-suite preparedness," said Bonnie Gwin, Vice Chairman and Co-Managing Partner of the CEO & Board Practice, Heidrick & Struggles.