Les Wexner has been the CEO of L Brands, the fashion retailer whose holdings include Victoria’s Secret and Bath & Body Works, since 1963. Warren Buffett has run Berkshire Hathaway for 47 years and counting. And Alan Miller founded Universal Health Services in 1978 and is still the CEO.
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, and has slowly climbed in lock-step with the economy. CEOs who stepped down in 2016 had been on the job for an average of nine years, and the average since 2001 is 8.9 years.
The numbers aren’t hard to explain.
First, CEOs with lots of tenure tend to be founders. Wexner and Miller founded their companies, while Buffet turned an aging textiles company into his holding company. More recently, Jeff Bezos founded Amazon.com in 1994 and remains at the helm after more than 20 years.
Second, non-founder CEOs of large companies don’t get that job when they are young. Bezos is 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 publically 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.
My advice to CEOs and to aspiring CEOs? Here it is:
- 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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