The high level of staff turnover, defned as churn (the percentage replaced in a year) among FTSE 100 CEOs reach 23% in 2013/14, meaning that nearly one in four top jobs is in a constant state of flux with leadership changes at the very top of the business. This was up significantly from 14% the previous year and is the highest since before the financial crisis began, notes KPMG research in its annual Guide to Directors’ Remuneration.

For FTSE 100 FDs, the figures are even higher, with a 24% rate of churn this year, up from 13% in the preceding 12 months.

As a result, KPMG calculates that in the past year, over half of the board rooms in the FTSE 100 experienced at least one change of executive director, the highest proportion in the last five years. The firm says this raises questions over whether attempts to link pay packages to long term corporate success remain meaningful.

David Ellis, head of reward services at KPMG in the UK, said: ‘Does it really make sense for companies to put pay structures in place that run for, say, five years, if churn is running at over 20%? 

'If this level of turbulence applies consistently across the FTSE100, no chief exec would be still in post after five years. 

'Of course, the reality is that there is some variance across the sample but even so, these high churn rates do beg the question of what is the most appropriate time horizon over which to structure a meaningful incentive package.’

As a result, Ellis says remuneration committees need to think carefully about the terms on which a new CEO is appointed, or the policy applied when a director leaves, which will be a major determinant of pay outcomes in any year. 

‘These terms – which are often couched in discretion to provide the all-important room to negotiate - should be crafted with the same care and attention as the performance conditions which govern how much an individual would be paid for delivering real value to shareholders,’ Ellis said.