A new study shows former CFOs generally underperform as CEOs
Yesterday’s CEO Daily focused on Carol Tomé—a former CFO (Home Depot) who has already doubled her company’s market value as a new CEO (UPS). But a new study suggests Tomé may be the exception. Spencer Stuart looked at the performance of 1,300 CEOs since the turn of the millennium and found that ex-CFOs generally underperform. The study found that 85% of CEOs fell into one of four categories—former CFO, former COO, former divisional CEO, and “leapfrog” leaders who came from below the second layer of management. The conclusion: “Leapfrog” leaders were the most likely—41.2%—to rank in the top quartile of CEOs for performance. Ex-CFOs were the least likely—7.9%.
Former divisional CEOs turned out to be the safest bets. While they were less likely to overperform than the “leapfrog” candidates, they also were the least likely to underperform of all four groups. You can access the full study here.
Separately, a coalition of 15 major employers are announcing today that they are adopting a rigorous set of 55 criteria to eliminate “algorithmic bias” in their human resource decisions, including recruiting, compensation and employee development. The Data & Trust Alliance was formed last year by former American Express CEO Kenneth Chenault and former IBM CEO Sam Palmisano, and includes American Express, CVS, Deloitte, General Motors, Humana, IBM, Mastercard, Meta, Nielsen, Nike, Under Armour and Walmart.
Yesterday I spoke with Chenault, who said the Alliance was created out of a recognition that “every big company is becoming a data company” and is going to have to wrestle with responsible data use. The Alliance started with HR because “every CEO is focused on talent and the whole talent process, and with automation, there’s a risk that technology can perpetuate bias.” Up next will be criteria for creating responsible personalization, and criteria for doing “new diligence” on data and algorithmic businesses.
I asked Chenault about the inclusion of Meta (Facebook) in the Alliance, given that it is frequently accused of irresponsible use of algorithms. His response: “Our view is that we can get companies to change. There is a major shift happening. The ‘move fast and break things’ era is over.”
You can learn more about the Alliance here. Other news below.
Vishal Garg, the CEO of Better.com, has apologized to his company after criticizing 900 employees he had just laid off in a Zoom call. Garg had claimed on an anonymous professional networking app that the laid-off workers were underperforming and therefore "stealing" from colleagues and customers. Garg: "I own the decision to do the layoffs, but in communicating it I blundered the execution. In doing so, I embarrassed you." Fortune
Boosters vs Omicron
Early studies from South Africa and Sweden suggest that the Omicron variant causes an incomplete loss of immune protection, and that boosters will still probably cut the chance of getting infected. But again, these are early and small studies, so stay tuned. Meanwhile, Australian authorities seem to have found a new type of Omicron that has fewer than half of the known Omicron's mutations, and is harder to track because it lacks a particular genetic quirk that makes Omicron a breeze to surveil with normal PCR testing. Bloomberg
The European Commission will tomorrow unveil a new proposal for reclassifying many gig workers, on platforms such as Uber and Deliveroo, as employees. The employee designation would be given when the company determines the worker's pay, gives them rules about their appearance, supervises their performance electronically, assigns working hours, and/or restricts their ability to work for other platforms. Politico
An Amazon Web Services outage yesterday had a big impact on services such as Disney Plus, Instacart, and Amazon's own Alexa and online retail app. It even gummed up Amazon's delivery services and delayed a presale for Adele's new tour. Fortune
AROUND THE WATER COOLER
How low can Evergrande go? The seemingly doomed Chinese property developer's shares fell another 6% today, making for a 20%+ drop so far this month, after it apparently missed a key debt payment deadline. Evergrande has not, as yet, said whether it has formally defaulted. Reuters
BlackRock supposedly went green a couple years ago, but now the financial giant is leading an investment into a new Saudi Aramco gas pipeline. BlackRock sees no contradiction, with CEO Larry Fink claiming Aramco and Saudi Arabia are "making meaningful, forward-looking steps to transition the Saudi economy toward renewables, clean hydrogen, and a net-zero future [and] responsibly managed natural gas infrastructure has a meaningful role to play in this transition." Fortune
Olaf Scholz has, as expected, been elected by German parliamentarians as the country's new chancellor. The Merkel era is now officially history. Scholz's new coalition government has a lot on its plate: the pandemic, a troubled economy, the energy transition, and a potential diplomatic crisis over the Nord Stream 2 gas pipeline if Russia goes ahead and invades Ukraine. Fortune
Visa has started advising its clients about cryptocurrency matters, through a new advisory practice within its consulting and analytics division. The U.S. bank UMB is apparently already using the service. CNBC
This edition of CEO Daily was edited by David Meyer.
This is the web version of CEO Daily, a daily newsletter of must-read insights from Fortune CEO Alan Murray. Sign up to get it delivered free to your inbox.