Consultant Conrad Liveris released a report, based on the annual reports and websites of ASX200 companies, identifying commonalities and norms in the educational and professional experiences of CEO's. According to his analysis, the CEO candidate pool has remained narrow (despite the fact that business is increasingly global) and the pathway to become CEO has likewise remained narrow and has changed little over time. The report questions, in the context of increasing community expectations of Australian business, whether businesses should consider revisiting their approach to ensure they are recruiting the best available talent rather than sticking with the familiar.
The report concluded that Australian firms remain conservative in making executive appointments. The report found that there are more ASX200 CEO's called Andrew than there are women. The 'average' Australian CEO is a man, most likely named Andrew (7% of CEO's) or Michael (5.5%). By comparison, 5% of ASX200 CEO's are women.
The report also found that 70% were promoted internally to CEO. Before becoming CEO, the report found that CEO's were most likely to be CFO's of the same company or headed a business unit within it. For those that weren't CFO's prior to appointment as CEO, 16% have principally finance experience. There are no CEO's appointed from business-wide roles (e.g. Human Resources, marketing, or legal). No CEO has headed more than two listed companies.
The report found that 75% of CEO's have principally domestic experience. CEO's generally have some (but limited) international experience or remit in roles (usually earlier in their careers). If the CEO does have international experience, these are mostly in single jurisdictions/markets. The report suggests this may be a 'distinct weakness' in an export-oriented market. The report also found that 65% have 10+ years of experience in the industry and 6% of CEO's are founders.
The report found that CEO's tend to have similar educational experiences, reflective of the years in which they were educated (the 1970's and the 1980's). Most attended 'sandstone' universities in the cities in which they were born and schooled and (most likely) now work. Most CEO's studied engineering, business or economics: 27% studied engineering, 25% studied business or economics (becoming accountants or finance professionals e.g. bankers), 6% have Bachelor of Arts degrees, and 4.5% studied law and became admitted lawyers.
The question to be addressed asked, is there a lack of diversity of skills or experience? Most CEO's shared similar educational experiences and followed similar pathways to become CEO.
The report did not seek to suggest that firms are necessarily making the wrong decisions with respect to CEO appointments. However, in light of the lack of diversity among ASX200 CEO's, it does question whether firms should consider revisiting their approach, to ensure they are recruiting the best available talent.
The proportion of CEO's who have undertaken further study is higher than in the general population: 34% have undertaken further study and 27.5% have an MBA. This is noticeably higher than the general population, where the rate of postgraduate education is -4%
There is a narrowness in who becomes CEO of an Australian company. Mr Liveris is quoted as saying that the results indicate that Australian firms have a very trusted method for choosing who will lead their business and that the pathway to get to the CEO role is fairly clear. Even where CEO's don't commence their career on the traditional pathway, they tend to fall into it at some point. Mr Liveris added that the narrow, common pathway towards the CEO role demonstrates assumptions about who should be CEO.
Mr Liveris made it clear that the report is not intended to suggest that the current approach to appointing CEO's is necessarily flawed. Rather he writes that, the report 'intends to stimulate thought on whether the current approach is fit for purpose. Indications from the market suggest that this has not been substantially changed in decades.' Mr Liveris adds that the limited international experience of CEO's may be a 'distinct weakness'.
The Australian Council of Superannuation Investors (ACSI) CEO Louise Davidson is quoted as saying that the results highlight a risk that companies are not taking advantage of the broader talent pool available. She stated: “This is yet another reminder that more work needs to be done on the diversity of management teams.”
The Australian Institute of Company Directors general manager of advocacy, Louise Petschler, reportedly expressed a similar view to that put forward by ACSI. Ms Petschler said: “Just as boards need to work harder to improve diversity around board tables they also need to ensure they are making use of the available talent pool when making CEO appointments…Gender diversity is obviously a critical consideration in this mix”.
Sources: Conrad Liveris report: Easy to Classify — The education and experiences of Australian CEOs; The New Daily, dated 11 May 2019.
