Alfred West has been CEO of SEI Investments since 1968. Warren Buffett has run Berkshire Hathaway since 1970, longer if you count the years when it was in (and transitioning out of) the textile business. And Gerald Shreiber has been CEO of J&J Snack Foods since 1971 when he purchased an ailing pretzel company at a court auction.
According to research by The Conference Board, these are three of the longest-tenured active CEOs of S&P 500 companies. They are, in fact, the exceptions to the rule, and the rule is that most CEOs hold that title for less than 10 years. In 2002, the average CEO of an S&P company had held the job for 11.3 years. It dropped to 7.2 years in 2009, the peak of the financial crisis, then slowly climbed in lockstep with the economy before dropping again in recent years. CEOs who stepped down in 2020, for instance, had been on the job for an average of 7.1 years.
The numbers aren’t hard to explain.
First, CEOs with lots of tenure tend to be founders. West and Schrieber founded their companies, while Buffett turned an aging textiles company into his holding company. More recently, Jeff Bezos founded Amazon.com in 1994 and remained at the helm for more than 20 years before stepping down.
Second, non-founder CEOs of large companies don’t get that job when they are young. Bezos was in his mid-50s, which is the average age of an S&P 500 CEO when he or she takes that title, according to The Conference Board.
And, third, it’s a tough job. Successor CEOs at S&P 500-type companies have worked hard to get where they are, and they have to work even harder as CEO. Many CEOs, myself included, take the role reluctantly. So they take it, work hard, and then step aside – sometimes by their choice and sometimes not. In 2016, 17.1 percent of the companies with an industry-adjusted two-year total shareholder return in the bottom 25 percent of S&P 500 companies made a change in CEO, according to The Conference Board’s research. The CEOs at those companies with the worst financial performance were 60 percent more likely to be replaced than CEOs at better-performing companies.
The pressure to produce strong financial returns is nothing new for CEOs of publicly held companies. What’s new in recent years is all the realities that come with a more transparent world. This is challenging for CEOs because now more than ever they have to respond to fires that once weren’t even sparks. Social media, in particular, allows almost everyone to have a platform to complain, and very often a CEO is in some way dealing with complaints that are unfounded or unfair. It’s frustrating and draining.
On the other hand, the heightened sense of accountability is good for the business world. CEOs aren’t just responsible for bottom-line results, but for their personal behaviors and for the corporate good or damage that comes from their company. Ask former Uber CEO Travis Kalanick. The expectations of shareholders, boards, customers, and employees are higher than ever.
Whether you’re already a CEO or aspiring to be in a leadership position, my advice to you is this:
- Don’t do it because you aspire to be the top dog. It’s not about you. Do it because you believe you can effectively lead a team to make a difference.
- Realize you have a commitment to a broader number of stakeholders today, whether you like it or not. And the success of your efforts will depend on how well you reach out to that broader group of individuals. Communicate continuously and with a positive attitude.
- Expect most days to be tough. Your job is to tackle the hard issues, not the easy ones.
- Never let the challenges alter how you treat others. People long to work with humble, honest, and human leaders. Always give them the dignity they deserve.
- Finally, prepare to pass the torch. You won’t be on the job forever, so act like it. Make sure you groom lieutenants who can take over when your task is complete. And make sure you don’t develop an ego-driven desire to stay past your time. Remember, it’s not about you.
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I am extraordinarily fortunate to share a mentor with the former CEO and Chairman of Alcoa, also formerly CEO of Siemens, Klaus Kleinfeld. Through our mentor, I was afforded a rare glimpse into the exciting, rewarding, and unforgiving world inhabited by world-class CEOs. Knowing more than what was reported in the media in the months leading up to Dr. Kleinfeld’s resignation in April, I was left with more questions than answers. Reflecting back on the whole chain of events, I’m left feeling uncomfortable. …Afraid.
My takeaway from watching this unfold, is that I can be overwhelmed and crushed. Even if I do a great job. Even if I build a great company, or restore and exceed a company’s former greatness. …Perhaps my takeaway was less “I can be overwhelmed and crushed” and more “odds are very much that I’ll be overwhelmed and crushed.” Yet I press on. …Our shared mentor likes to say, “The only easy day was yesterday! I always wished today would be a [expletive]!!” I’m with him! It sounds like we’re on the right page according to your 3rd piece of advice.
To that end, our mentor has me do something every day that scares me. I get to choose what it is. Sometimes its something as innocuous as making a phone call. It’s been amazing to see the change in myself since I started this exercise, because I see my default shifting from paralyzed by fear to taking action despite fear. In a way I can’t explain, I look forward to the day when I can take action despite fear at the level of Dr. Kleinfeld. I think your first piece of advice hit it on the head: I press on because I know my only chance to make a difference is by rising to that level of vulnerability. If I rise that high, I can make a difference or get crushed (maybe both). If I don’t rise that high, I 100% for certain can’t make a difference. Our mentor also says, “When value is clear, decisions are easy.” Value is clear to me. And I act on decisions. I press on.
Elon Musk is a solid example of advice points 2 and 5. Regardless of what one thinks of him and the things he’s doing, it’s hard to argue that he’s not stellar at connecting with broad groups in positive ways. From an academic perspective, he’s not a very polished public speaker. But he connects! As evidenced by Tesla rolling right past Ford and a week later past GM to claim the highest market cap in the US! We get a unique opportunity to observe how well Mr. Musk has embraced number 5 as he passes the torch at Tesla. Who leaves on top like that?! …Someone who takes action despite fear!
Thank you for these articles, Mr. Rakowich. They provoke a lot thought and affirm that I’m on the right track.