When a CEO exits, the tab isn’t just measured in headlines. It’s also measured in the millions. Last year, 42% of CEO departures in the Russell 3000 were firings, up from roughly one in three over the previous decade, according to Bloomberg. Severance alone costs a median $6.2 million. Recruiting and prying away a successor added another $9 million in sign-on incentives.
Layer on search fees, advisory services, retention bonuses, and the inevitable legal and PR bills, and the price tag quickly soars into the tens of millions. And then comes the real hit: PwC estimates that forced CEO transitions cost companies an average of $1.8 billion in lost shareholder value compared to planned succession. A CEO exit isn’t just expensive, it’s also one of the costliest governance failures a board can face.
The Overlooked Insurance Policy
Boards hedge against cyberattacks, regulatory fines, public perception, supply chain shocks, and geopolitical volatility. They spend millions on insurance and consultants to manage those threats. Yet, one of the most material risks to enterprise value—the health and capacity of the CEO—rarely receives the same level of attention.
Unlike market shocks and geopolitical surprises, this is a largely preventable risk. A CEO’s ability to think clearly, endure pressure, and remain resilient is the ultimate shock absorber in times of volatility. Neglect it, and you create the silent fault line that eventually cracks under strain.
Boards will pay billions to clean up the consequences of a failed CEO, but far fewer will invest even a fraction of that to prevent the collapse in the first place.
The Confidence Gap: Where Misalignment Begins
The staggering costs Bloomberg outlined are the aftermath. The real warning signs emerge much earlier.
Spencer Stuart’s research reveals a notable disconnect: only 22% of CEOs believe their boards provide effective support, compared with 43% of directors who believe they do. Sixty percent of CEOs want their boards to serve as thought partners on complex problems, yet only 41% feel they receive that support. More than four in ten say they can “rarely or never” be vulnerable with their board when making difficult strategic calls.
There’s also evidence that clarity helps: 68% of CEOs who set explicit expectations with their boards about what support looks like report feeling effectively supported, compared with just 50% who don’t. That gap is a fixable one, but only if boards are proactive and deliberate in their approach.
For directors, this should be a flashing red light. A CEO who feels isolated or unsupported is far more likely to burn out, make poor decisions, and eventually end up in the forced-exit column that Bloomberg quantified.
Why Capacity Fails Before Performance
Most CEOs aren’t pushed out for scandal. Bloomberg’s analysis shows that “for cause” firings are rare. More often, exits follow a gradual decline in performance, marked by missed targets, strategic missteps, and a decline in board confidence.
Behind those results is something more difficult to measure: capacity.
- Fatigue distorts a leader’s judgment.
- Isolation weakens a leader’s alignment and makes it more challenging to make informed, strong decisions.
By the time financial results reflect the decline, the underlying issue—namely, an overextended and unsupported CEO—has already taken root. Performance fails last, while capacity fails first, and boards must govern accordingly.
The Silent KPI Of CEO Longevity: Trust And Health
Markets review quarterly returns, and boards review earnings per share. But the most telling indicator of CEO longevity isn’t on a financial dashboard. It’s trust, reinforced by health.
When trust between boards and CEOs deteriorates, cracks spread quickly. Forced exits rise, confidence declines, and momentum stalls throughout the organization. Yet even trust isn’t enough on its own. A trusted CEO who lacks the health, stamina, and resilience to endure will still falter.
The data tells a consistent story: Bloomberg quantifies the financial costs of forced exits while Spencer Stuart highlights the widening trust gap between boards and CEOs. Together, they point to the same conclusion: trust plus health is the silent KPI that predicts tenure. Ignore it, and the odds of a costly exit rise sharply.
CEO Health Is Governance Insurance
The math is simple: a fraction invested in sustaining a CEO’s capacity saves billions in avoided turnover costs, lost momentum, and damaged shareholder value.
Boards will have to move beyond oversight to true partnership by creating clear agreements on how they support a CEO’s capacity, embedding resilience into succession planning, and treating health not as a perk but as a fiduciary duty. For CEOs, it means guarding their capacity as fiercely as their balance sheet and making alignment with the board a structured, ongoing conversation.
In a business environment defined by volatility, CEO health is the cheapest governance insurance boards can buy, and the surest way to protect long-term enterprise value.