Why give up IBM's top job at 60?

Decoding IBM's traditional CEO retirement age

The traditional retirement age for CEOs at IBM has been 60, or close to it.

That tradition helps explain why IBM CEO Sam Palmisano is stepping down and why the new CEO, Virginia Rometty, 54, may have just six years to leave her mark on the company.

Palmisano isn't stepping down because of apparent displeasure by the board, of which he is chairman. He is leaving after having set a strategic direction for the company through 2015.

But there is a logic to a relatively early retirement by a CEO, and not just at IBM.

The average age of a departing CEO is 61, according to The Conference Board, in a report this year on CEO succession. It calculated this figure after studying CEO turnover among companies listed on the Standard & Poor's 500 ranking of the largest public corporations.

That average age represents both retirements and those CEOs who, for one reason or another, were forced out of their jobs, likely in their 50s, according to Jason Schloetzer, an assistant professor of accounting at the McDonough School of Business at Georgetown University and an author on the study.

Most companies adopt mandatory retirement ages for a CEO between 62 and 65, Schloetzer said.

An early CEO retirement can be beneficial to a company by making it "clear to the people reporting to the CEO that if they work hard, the promotion potential is there," Schloetzer said.

If a mandatory retirement age were, say, 75, it would be unclear how long the CEO's tenure was going to last. That could prompt some top managers to seek jobs at other companies, where opportunities to move into the upper echelons might seem more imminent, or it could just cause them to lose the incentive to work hard to distinguish themselves as someone who could succeed at the next level, Schloetzer said.

The traditional retirement age for CEOs at IBM has been 60, or close to it. Should CEOs be forced to step aside when they get to 60?

Patrick Thibodeau covers SaaS and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov, or subscribe to Patrick's RSS feed . His email address is pthibodeau@computerworld.com.

Copyright © 2011 IDG Communications, Inc.

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