Mr. Saidi, what do businesses seek in a CEO today, and what has changed over time?
Farzad Saidi: We document a fundamental shift in the age profile of newly appointed CEOs
in the US, and this trend also holds true in Europe. Our analysis suggests that the aging
trend can be explained by firms increasingly seeking leaders with generalist skills. They
want CEOs who are able to navigate rising uncertainty and complex regulations across
different geographic regions and business lines. Hence, there is a growing demand for skills
that enable coordination, adaptation, and decision-making under heightened risk. Building
such diverse capabilities takes years. That is why today’s CEOs have longer career paths and
are older at appointment compared to their counterparts in 2000. We analyzed data from
business networks from LinkedIn and BoardEx. They lend support to this trend, which is
particularly pronounced in smaller, potentially non-listed firms. Unlike large firms that can
cultivate their own generalists, smaller firms are forced to hire executives with such broad
experience from outside.
Do executives adapt to the new requirements?
Farzad Saidi: Yes, both sides are adjusting. Today’s aspiring CEOs are willing to accept
slower career progression and compensation growth in the short run to build the diverse
experience profiles boards are looking for. We show that this is often a deliberate choice.
Executives increase their job mobility on purpose to accumulate experiences across
positions, firms, and sectors.
Could there be a downside of older CEOs?
Farzad Saidi: Generally speaking, older CEOs tend to take less risks. For boards, our findings
highlight a potential trade-off between appointing older, more experienced CEOs to build
resilience in uncertain environments and the potential cost to growth and innovation.
Boards should be aware of this trade-off and adjust their governance structures
accordingly. They need to ensure that stability does not come at the expense of a firm’s
long-term adaptability to modern-day challenges.
What are the effects of technological disruptions, such as AI, on CEO appointments?
As automation takes over routine tasks, the importance of coordination, adaptation, and
decision-making may grow. Technological disruptions, such as AI, increase uncertainty,
making experienced generalists potentially more valuable and possibly reinforcing the
trend of older CEOs.
Our results offer an optimistic perspective on aging workforces in general. The trend
toward older leadership is not a problem, but a rational market response to uncertain
business environments. In the same vein, demographics can offer opportunities for
experienced workers to remain productive and valued in the labor market.