by Angela Rodenhauser

November 8, 2016

Last year, more than 10% of companies on the S&P 500 Index named a new chief executive officer. That’s according to executive search and leadership consulting firm Spencer Stuart’s 2015 CEO Transitions report. In addition, according to PWC’s 2015 CEO Success study, CEO turnover at the 2,500 largest companies in the world rose from 14.3% in 2014 to 16.6% in 2015.

Reasons for a CEO’s departure vary – some are the result of long-term succession planning, while others may be sudden or even unexpected due to company performance, personal decisions or a merger/split of the company. Given the array of circumstances, how these transitions are addressed in a company’s annual report also varies.

A leadership transition can be an uncertain time for investors, and the annual report can play an important role in communicating key messages such as the new CEO’s vision for the company and any changes in strategy. Here are a few examples of how companies effectively dealt with CEO transitions within their 2015 annual reports.

Calumet Specialty Partners

In Calumet’s 2015 Annual Report, the company dedicates a page to its 25-year legacy and includes a historical timeline, from the founding of the company by the outgoing CEO to the start date of the incoming CEO.  The report includes a letter to fellow investors from each leader –  the former CEO (who became executive vice chairman) provides the year in review and introduces the new CEO, and the new CEO’s letter includes a sidebar highlighting his experience, current responsibilities and vision for the master limited partnership. (Dix & Eaton client)


The Sherwin-Williams Company 2015 letter to shareholders (signed by the outgoing CEO) explains the CEO transition and features a sidebar on each leader focusing on their accomplishments and experience with the company. (Dix & Eaton client)


The CBIZ 2015 Annual Report’s letter to shareholders addresses its recent CEO transition.  The company recognized the achievements and legacy of the outgoing CEO, who assumed the role of non-executive chairman, with a tribute page at the end of the report. (Dix & Eaton client)

Cisco Systems

While Cisco kept the format of its 2015 annual report quite simple (10K wrap with a letter and no visuals or photography), the company addressed its recent CEO transition with “A Special Thank You” signed by the outgoing CEO at the end of the regular shareholder letter. He expressed gratitude for the support he received through the years as well as his confidence in the leadership of the new CEO.

Darden Restaurants

Darden has been quite direct about the company’s leadership and board changes in its recent annual reports. In fact, in the 2015 annual report, Darden featured  a large photo of the new CEO and chairman on the opening page, and the changes were immediately addressed at the start of the shareholder letter:  “We experienced meaningful change in leadership in fiscal 2015 beginning with the election of a new Board of Directors. The new Board appointed a new Chairman of the Board and then selected a new Chief Executive Officer. This level of change in leadership is virtually unprecedented ….” Given the major board and management changes the company has experienced, the open and direct approach is a good example of transparent corporate governance and communication with shareholders.

If your company is undergoing a CEO transition this year, there are many factors in deciding how to address (or not address) the transition. Is the incoming CEO a company veteran or coming from the outside? What were the reasons for the previous CEO’s departure? How has the investment community responded to the change? The answers to these questions will determine how the transition should be handled in the annual report. And while there is no “right” way,  it is important to think this through ahead of time, as this is not just another year for your company.

Has your company experienced a management transition this year? What will your approach to communicating this transition be within the annual report?

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