In June of 2019, I wrote a story titled “More People Named Jeffrey Got Top CEO Jobs Than Women Last Year.” The piece lamented that of the 23 new leaders that America’s 250 largest companies chose last year, just one––Michelle Gass of Kohl’s––was a woman, so the lone female was outnumbered not just by two gents named Jeffrey but another two named Michael. In 2019, that dismal picture brightened a bit, launching what finally looks like a durable shift to promoting the best talent, regardless of gender. The S&P 250 placed four women in the top job, and while that number may sound low, it’s almost half as many as reached the pinnacle over the previous five years.
That trend is highlighted in The New CEO Report, a yearly study that examines the backgrounds of the leaders who ascended during the prior year to lead S&P 250 companies and pinpoints qualities that corporate boards prize most. It’s compiled by Feigen Advisors, the firm headed by America’s leading coach for CEOs, Marc Feigen. In previous stories, I’ve nicknamed Feigen “the CEO Whisperer.” Over the years, he’s guided 30 CEOs of leading global companies, either as heirs apparent or after they’ve taken charge, including Bob Iger of Disney and Mark Fields of Ford, and today advises the heads of a dozen members of the Fortune 500.
The 2019 study shows that corporate boards are following well-worn practices, while at the same quickening their push in new directions, notably in promoting women, putting global experience near the top of their checklists, and choosing deep technical knowledge over charisma. Here’s a review of the findings, along with running commentary from Feigen, whose many hours in the boardroom provide insights into the traditional—and new—ways that directors think about succession.
Boards favor insiders, and that’s a good thing
Feigen Advisors has been producing the report since 2014, and over those six years, many of the metrics remain remarkably unchanged. In 2019, the average age of the new CEOs was 54, the same as over the previous half-decade, and their predecessors served long terms, averaging 8.4 years, and retired at 60, also extremely close to the benchmarks from 2014 to 2018.
Another feature that remains constant is the preference for insiders. Of the 30 new CEOs, 26 were promoted from within, but the group divides into two categories. The larger group of 19 are long-time veterans averaging two decades of service. Five had been at the company over 30 years, among them Noel Wallace of Colgate-Palmolive and Enrique Lores of HP. But trajectory for the other seven underlines a shift that has accelerated in recent years, hiring potential superstars from the outside five or six years before the boss is scheduled to retire, then “fast-tracking” the candidates through a series of key positions to gauge their strength as leaders. The roster of fast-trackers include Ron O’Hanley of State Street, who joined from Fidelity in 2015, and Christopher Kempczinski of McDonald’s, who came from Kraft Foods in 2015.
Companies should promote from inside, says Feigen. “That almost 90% of the new CEOs were internal candidates shows that succession planning is working, and boards are developing the next generation of talent to run their companies,” he tells Fortune. He cautions that companies that don’t stick to an “inside favored” stance are sending a dangerous message. “A board that looks outside is telling its management team that not one of you is good enough to run this company,” he says.
Companies go outside mostly for turnarounds
This year’s list includes two changes made by troubled companies sorely in need of rescue. Charles Scharf, a longtime protégé of Jamie Dimon and highly successful leader at Visa, joined Wells Fargo from BNY Mellon. He takes charge of a formerly great name tarnished by scandal and suffering from a crisis of leadership that saw two CEOs depart in three years. Miguel Patricio left a top position at Anheuser-Busch InBev to take the reins from Bernardo Hees at Kraft Heinz after the food giant’s $10.2 billion loss in 2018.
“A turnaround is better led from without, so the best solution is to go outside,” says Feigen. “Just look at Scharf’s track as a two-time CEO. You can’t find that kind of experience in the management ranks.” Still, Feigen cautions that if a company needs what he calls “a transformation,” it’s far better to choose a star from the inside. “A company seeking a transformation is different from one that needs to go outside to save itself,” he says. Transformation is embraced by good performers that need to move into digital technology, launch exciting new products, and attract and retain the workforce of the future.
He cites two masters of transformation who reached the CEO suite this year, Michel Khalaf of MetLife and Jim Collins of Corteva. “At MetLife, Steven Kandarian stabilized the company following the financial crisis. Michel can build on that success and transform the business. He even moved from splendid offices in the MetLife tower to a lower floor just to work more closely with his people.” Corteva is the spinoff of DowDuPont’s agricultural business. Collins trained for the job by leading the integration of Dow and DuPont’s ag franchises that formed Corteva. “Jim can create a new kind of agriculture company that increases transparency so that customers better understand the workings of the food chain between farmers and consumers. Under Jim’s guidance, Corteva announced 14 sustainability goals to provide healthy food and support a healthy planet.”
The big rise in female CEOs is a sign of the times
The four women who took charge last year are Julie Sweet of Accenture, Kathy Warden of Northrop Grumman, Corie Barry of Best Buy, and Christine Leahy of CDW, the maker of printers, scanners, and digital products. Remarkably, Accenture and Northrop rank among the top 10 largest companies that named new CEOs. Here’s a stat for the ages: All four of the women replaced a male CEO.
The four come from a wide diversity of backgrounds. Sweet and Leahy joined as lawyers, a frequent entry point for women. They both rose to major positions overseeing M&A and corporate strategy, and Leahy headed the operations of a key international IT business she helped acquire. Barry is a former auditor who rose to CFO and also oversaw strategy, while Warden, a GE veteran, led mission systems at Northrop and served as president and COO before taking the top job.
Clearly, women CEOs are still far too rare. But the trend is positive. Consider that only nine women won the prize from 2014 to 2018. “Boards have gotten the message that they need to do a much better job on ethnic and gender diversity,” says Feigen. Succession planning, he notes, means reaching far down into the organization to identify the next generation of leaders, and then nurturing their progress for the next decade or more until a seasoned superstar is ready to take charge. “Companies realize that they need to have a rich and diverse pool of candidates to choose from,” he adds. “It’s only by planning ahead that you ensure getting the best possible leaders.”
Feigen points out that the lack of a single African-American CEO last year means America’s boards have a lot more work to do. In fact, over the previous five years, the S&P 250 named just two black CEOs.
Global experience is more and more prized
This writer was amazed that eight of the 30 new CEOs received their undergraduate education outside the U.S. These include Alphabet’s Sundar Pichai (India), Pfizer’s Albert Bourla (Greece), Schlumberger’s Olivier Le Peuch (France), Kraft Heinz’s Patricio (Brazil), and Molson Coors’s Gavin Hattersley (South Africa). Many others spent long portions of their careers managing global and national franchises. Adam Schechter of LabCorp, headed Merck’s global pharma and vaccine business from 2010 to 2018, and Brian Tyler of McKesson led its $28 billion European operations just prior to being named CEO.
“Global companies need globalists running them,” says Feigen. “Boards are looking for leaders who have spent a lot of their careers abroad, speak foreign languages, and lead where the growth is coming from––and that’s mainly from overseas.”
Deep technical knowledge is trumping personal magnetism
Just look at the educational credentials for the new 30, and you’ll find another interesting pattern. A large number hold technical degrees and relatively have few diplomas in the likes of marketing. Nine of the freshly minted CEOs received either undergraduate or graduate degrees in engineering or biotech, a group that encompasses Gerardo Norcia of DTE (chemical engineering), Preston Feight of Paccar (mechanical engineering), Lores of HP (electrical engineering), Daniel O’Day of Gilead (biology), and Bourla of Pfizer (Ph.D. in biotechnology).
Feigen views those tech-heavy résumés as symbolizing a shift in the personal qualities, and mastery of knowledge, that boards are increasingly seeking. “We’re seeing a shift away from charisma and boardroom savoir faire,” he says. “Boards are seeking leaders who are more comfortable around innovators and understand the basic science. It’s no longer all about the big man on campus, it’s about the person who spent a lot more time in the lab or the field, who may not be as extroverted, but knows the next breakthrough when he or she sees it.” It’s great sign if indeed America’s boards are choosing knowledge and competence over charm and political acumen. The proof of that progress will be quickening the march toward diversity.
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