Good morning.
The job of CEO has gotten harder in recent years, thanks to accelerating technological change, proliferating stakeholder demands, and a world awash in volatility and uncertainty. And as the job has gotten harder, so has the task of finding CEO successors. I spent some time Friday with two masters of CEO succession, Spencer Stuart’s Jim Citrin and Heidrick & Struggles’ Bonnie Gwin. Their insights:
—Inside candidates for CEOs increasingly trump outsiders. Among new CEOs in the COVID era, 78% were internal, according to Gwin.
—COO remains the most popular route to the CEO job, but there was an uptick in CFOs chosen last year (16%), says Citrin.
—And for the first time, none of the new CEOs in the S&P 500 last year were given the title of chair at the outset, says Citrin. Gwin notes in the Fortune 500 today, only 37% of CEOs also hold the chair title.
Here’s the data that most shocked the CEOs in the audience: Citrin said that while the average tenure of CEOs is about eight years, peak performance occurs in the 11th to 15th year, as measured by total shareholder return relative to the market. “If you can hang on for that long, which only about 20% of CEOs do, that’s where the outperformance happens.”
A few more takeaways:
On boomerang CEOs: “There have been only 22 S&P 500 boomerang CEOs, like Bob Iger coming back to Disney or Howard Schultz coming back into Starbucks, appointed since 2010 (nine of which were interim placements.) A.G. Lafley famously did the same at P&G…But it’s a very small minority (only 3%), and they tend not to do as well in their second term as they did in their first.”
—Citrin
On co-CEOs: “It has worked well in a few situations, but it’s pretty tough. Because what are the guardrails? What does one do versus the other?”
—Gwin
On CEOs who are chosen from the company’s board. “About 6% of CEOs come from the board, and that’s been consistent over the last 20 years. They tend to perform best—slightly better than insiders or outsiders.”
—Citrin
More news below. And read how Sam Altman says he broke all the rules of good startups in developing ChatGPT.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
‘No good options’
U.S. Treasury Secretary Janet Yellen said on Sunday that there were “no good options” if Congress fails to raise the debt limit, which the U.S. could breach as early as June 1. The deadlock between House Republicans and the Biden administration is leading some economists to call for unorthodox alternatives to avoid economic chaos. ABC News
Open-source no more
The Wall Street Journal reports that China’s decision earlier this year to close off foreign access to public data was caused by U.S. think tank reports on sensitive Chinese policies. Beijing is trying to clamp down on external investigations of its economy, going as far as to raid the China offices of Bain & Co. and the Mintz Group.
Berkshire Hathaway
Warren Buffett’s conglomerate Berkshire Hathaway reported a 12.6% year-on-year jump in earnings on Saturday, as the company’s insurance empire recovers from a slump. Shareholders flocked to Berkshire Hathaway’s annual meeting in Omaha, where Buffett and longtime business partner Charlie Munger opined on the EV boom, the banking crisis, and U.S.-China relations. CNBC
AROUND THE WATERCOOLER
How to lead a team, when you used to be their peer: ‘Don’t be afraid of ruffling the feathers of people who were once your support team’ by Orianna Rosa Royle
Warren Buffett wary of investing in electric vehicle makers in U.S., says auto industry is ‘just too tough’ by Steve Mollman
‘Quiet quitting’ the U.S. housing market: One group of sellers has disappeared by Lance Lambert
OpenAI CEO Sam Altman says the remote work ‘experiment’ was a mistake—and ‘it’s over’ by Steve Mollman
Bluesky says no ‘heads of state’ allowed on its Twitter-like platform for now by Kylie Robison
These are the 4 jobs that are set to disappear in a decade, and the ones that will take over by Jane Thier
This edition of CEO Daily was curated by Nicholas Gordon.
This is the web version of CEO Daily, a newsletter of must-read insights from Fortune CEO Alan Murray. Sign up to get it delivered free to your inbox.
