Time for boardrooms to look beyond age and experience in new CEOs: Beth Kowitt

In the often opaque realm of corporate boardrooms, Spencer Stuart's recent data on CEO transitions sheds light on a concerning trend. The average age of incoming S&P 500 CEOs in 2023 hit a record 56.4, signalling a cautious, risk-averse approach by boards. While experience and stability are prized, the study warns against over-reliance on seasoned CEOs. Research suggests that first-time CEOs outperform repeat CEOs over the long term, emphasising the need for adaptability in an ever-evolving business landscape. Boards must resist clinging to outdated paradigms and consider fresh leadership approaches..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..By Beth Kowitt.The corporate boardroom is one of the most opaque places in US business. It's here that directors wrestle with the sensitive and contentious issues they'd rather shield from the public eye — compensation, crisis management, talent development, corporate culture and those now incendiary acronyms, DEI and ESG. .___STEADY_PAYWALL___.One of the rare times we do get a clear view of a board's thinking is when it undertakes its most important and public job: choosing a new CEO. This critical choice reflects not only a company's pain points and priorities but also its directors' outlook on the broader business world..Read more: From the FT: How Silicon Valley got Sam Altman back as CEO of world's hottest startup.What we can parse then from new Spencer Stuart data on CEO transitions is that there's been a fair amount of gloom floating around corporate America recently. The executive search firm found that the cohort of incoming S&P 500 CEOs last year were, at an average age of 56.4, the oldest it has ever recorded. More than 20% had previous CEO experience, up from just 7% in 2022. And after a historic level of CEO turnover post-pandemic, the number of new appointees was down, as boards put the brakes on shuffling the top job..Collectively, this signals a real sense of worry. "Seasoned" and "experienced" have become the buzzwords du jour in CEO search land, while delaying a handoff altogether was the even more preferred route. Boards want what Spencer Stuart has described as a "safe pair of hands" — someone who has previously navigated the kind of disruption and crisis that directors see on the horizon. As Spencer Stuart puts it: "We see instability outside the company drive a desire for stability inside the company.".The problem, though, is that disruption and instability have a sneaky habit of reinventing themselves. The world is constantly evolving, and the challenges companies faced yesterday are almost certainly very different from the ones they'll stare down tomorrow. For boards to assume that an experienced CEO has a playbook ready to guide them through the current moment is probably off base. What worked at a CEO's last job — at a different company with a different team facing a different set of micro and macro problems — is just not likely to work again..This isn't just a hunch: Another study from Spencer Stuart, this one from 2020, found that S&P 500 first-time CEOs outperformed repeat CEOs over the long term, producing higher total shareholder returns with less volatility. Among executives who had led two companies, 70% performed better during their first stint; meanwhile, only 38% outperformed the market during their second go-round. .Repeaters, however, performed better than first-timers during the early years of their tenures, which makes sense — the learning curve isn't as steep for someone who has done the job before. But year four was a turning point. It was then that the strategy driving the experienced CEOs' early wins appeared to stop working. "It appears the recipe for success may be less about experience per se and more about gaining company-specific experience while remaining adaptative," the search firm writes. I also suspect that first-timers are more likely to admit what they don't know and to look to others for guidance, breaking out of the old paradigm of the superhero CEO who has all the answers..This shift toward older and repeat CEOs is a major reversal from 2022 — a year when nearly 30% of newly appointed S&P 500 CEOs were under 50, more than double 2018 levels. Cathy Anterasian, a Spencer Stuart consultant specializing in CEO succession, told me that 2022 felt like a "comfortable year" to boards. That sense of normalcy gave them the security to pass the baton to the next generation of leaders..At the time, I worried that any new era of enlightenment might be short lived: .There's a risk now as we face off against a period of economic uncertainty that boards will fall back on their old habits, relying on outdated paradigms of who should and shouldn't be a CEO. That might be the comfortable choice, but it's a mistaken one. Companies are facing new kinds of challenges and expectations today than they have in the past. Maybe it's time for a new kind of leader to tackle them..There is, of course, nothing wrong with age or experience. But boards should be aware that neither is a panacea for the challenges ahead. And as we've seen in other arenas (hello, politics!), refusing to move on to the next generation of leaders can be a risk all its own. .Read also:. Real estate turmoil: $1.2 Trillion loss sparks concerns for smaller banksAnglo American CEO defends leadership amid commodity price slump and operational challenges Amazon surges with strong sales and exceeds estimates, CEO Jassy's cost-cutting reshapes the tech giant.© 2024 Bloomberg L.P.