America's global companies: a leadership profile - characteristics of chief executive officers

Business Horizons, Jan-Feb, 1993 by G.R. Bassiry, R. Hrair Dekmejian

Professional Background: Does It Matter?

The 800 CEOs came from 12 different professional backgrounds (see Figure 8). A background in banking represented the largest professional category (17.9 percent), followed by finance (14.5 percent), administration (14.4 percent), technical (13.2 percent), and operations (12.2 percent), with smaller percentages representing marketing, law, insurance, sales, retailing, investment, and journalism.

It is interesting to note that the fields of banking, finance, and investment all taken together represent more than one-third of all CEOs. This is a telling statistic about American business leadership: it suggests that the United States corporate structure tends to recruit and reward individuals with financial backgrounds rather than those with technical or even administrative skills. One might surmise that the low probability of upward mobility for those with technical backgrounds tends to discourage gifted individuals from pursuing professional careers in technology. Could this be one reason for the progressive technological inferiority of many American firms and products?

While a professional background in finance remains an advantage in upward mobility, the recent savings and loan scandals may have an adverse impact on this professional category. The future may well belong to executives with administrative and technical skills, particularly if there is a change in the American corporate ethic that reemphasizes technical and organizational innovation to challenge the increasing dominance of Japanese and European competitors.

Tenure with Firm: Are U.S. Executives "Company Men"?

Company loyalty, expressed by many years of service, seems to be an essential precondition to reaching the top for a large majority of CEOs. Eighty-one percent of the 800 CEOs had tenures of more than ten years, while 60 percent had worked in their respective companies for more than 20 years. The overall tenure figures showed a mean of 23.7 years, a median of 25 years, and a mode of 32; this reflects a high degree of company loyalty. This finding runs contrary to the general assumption that top American companies are afflicted with high levels of instability and cross-company mobility (see Figure 9).

While most CEOs in this sample had long tenures with their firms, a significant percentage (40 percent) had lesser tenures than is the norm for the CEOs of many top Japanese companies, who remain with their respective firms from "the cradle to the grave."

Tenure as CEO: How Long is Long Enough?

Vilfredo Pareto's concept of "circulation of elites" (Pareto 1935) finds its realization in the significant turnover that characterizes the top corporate ranks. The extent of circulation can be measured as follows: a mode of 1 year, a median of 5, and a mean of 8.3. Almost half (47 percent) had been CEOs five years or less, while 72 percent had served ten years or less. Fewer than 8.4 percent had retained their positions for more than 20 years (see Figure 10).

The considerable turnover of CEOs might well be a mixed blessing for long-term corporate health. While in political life the tradition of democracy encourages regular replacement of elected leaders, frequent leadership changes in corporate life could introduce an element of instability that is often undesirable. The finding that almost half of our CEOs had tenures of five years or less could be taken either as an indication of corporate renewal or as evidence of possible crisis at the top brought on by loss of markets, corporate takeovers, or the tendency of overambitious CEOs to seek frequent horizontal mobiliW to maximize their earnings.