Also: Yellen's debt warning, China's data crackdown, Berkshire Hathaway earnings. 
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
|
|
|
‘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 & Company 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 long-time business partner Charlie Munger opined on the EV boom, the banking crisis, and U.S.-China relations. CNBC
|
|
|
Generative AI in the Workplace Organizations are looking more closely at the potential capabilities and implications of Generative AI, from public service applications to addressing climate change and transforming business functions. Explore insights that might help business leaders extract enterprise value from Generative AI in Deloitte’s AI Institute’s recent report. Read more.
|
|
|
Subscribe to the weekly Trust Factor newsletter |
How to earn, retain, and strengthen your trust with employees and customers Trust has always been one of the cornerstones of successful business. But in today's rapidly changing economy, it's becoming the new KPI that executives need to succeed. Join the conversation. |
|
|
Thanks for reading. If you liked this email, pay it forward. Share it with someone you know. Did someone share this with you? Sign up here. For previous editions, click here.
To view all of Fortune's newsletters on the latest in business, go here.
|
|
|
|
 |
