CEO Qualifications and Performance
This short project was carried out with the support of CE Asset Management Ltd, a Swiss Asset Manager focused on institutional clients. It looked at the educational and career background of CEOs in the Pharmaceutical, Hi-tech and Fashion Retail industries to see whether this background might influence company performance.
The hypothesis was that breakthrough innovation would be important to performance in these industries and that CEOs with an educational and particularly a career background to personally lead innovation, would be able to perform better. We looked at the educational and career background and shareholder returns of 297 CEOs during the period from 1995 to 2014.
Surprisingly, many CEOs do not have a relevant career and educational background to personally lead innovation. Pharma company CEOs, for example, commonly have a background as lawyers or salesmen, have no relevant technical education and have never personally worked, before becoming CEO, in R&D.
Companies with CEOs with a relevant educational and career background do indeed seem to have a rather better chance of outperforming thanks to breakthrough innovation. However, with the exception of pharmaceuticals, even over the twenty-year period considered and focussing on three industries widely viewed as innovative, outperformance for public companies seldom actually requires breakthrough innovation.
The output of the project was documented in the September 2015 HBR digital article Many CEOs Aren’t Breakthrough Innovators (and That’s OK).