honoluluadvertiser.com

Sponsored by:

Comment, blog & share photos

Log in | Become a member
The Honolulu Advertiser
Posted on: Sunday, August 17, 2008

When it comes to age, Obama, McCain miss CEO sweet spot

By Del Jones
USA Today

Hawaii news photo - The Honolulu Advertiser
spacer spacer

Barack Obama turned 47 last week, and John McCain turns 72 on Aug. 29, which leaves voters to choose from candidates who some would consider too young and too old to be CEOs of the largest corporations.

Obama, born just after Alan Shepard became the first American in space, would have a hard sell to convince some boards of directors that he's too young. McCain would have a tougher sell as someone so old that he was born before pilot Amelia Earhart vanished trying to circumnavigate the globe.

There are some CEOs running major companies in their 40s and 70s, and those interviewed say that age has little to do with success and leadership. What matters far more, said 49-year-old Rich Templeton, who became CEO of Texas Instruments at 45, is whether executives see the heart of their career and accomplishments ahead of them or behind.

"Leaders at all ages have to be willing to hear the bad news over and over and still see a silver lining," said Leslie Gaines-Ross, chief reputation strategist at Weber Shandwick. She said optimism is key.

But good leaders don't turn a blind eye to the data without good reason, and the data about corporate leaders indicate that age matters a lot more than CEOs and CEO experts let on. There is a leadership sweet spot that falls in the 50s and early 60s.

The median age for an S&P 500 CEO in 2007 was 55, according to executive search firm Spencer Stuart. If anything, companies are gravitating more toward the sweet-spot age. Since 2000, the percentage of S&P 500 CEOs between the ages of 50 and 59 has increased to 58 percent from 53 percent, Spencer Stuart said.

Among today's S&P 500 CEOs, 27 (5.4 percent) are 47 and younger, and six (1.2 percent) are 72 and older, according to Spencer Stuart and USA Today research.

ENERGY VS. WISDOM

Age is a leadership wildcard as headhunters and corporate boards ponder tradeoffs such as energy versus wisdom. An experienced CEO might help a company avoid repeating mistakes, but the flexibility of youth might be important in a fast-changing environment.

When CEOs are hired, most talented 45-year-olds must wait their turn, and most talented 65-year-olds make way.

Management consulting firm Booz & Co. tracks departing S&P 500 CEOs, and 29 percent of 2,258 who left the job from 1995 to 2007 were originally promoted to the top when they were 47 or younger.

Only 13 (0.6 percent) became CEO at 72 or older, which makes a new CEO hire at McCain's age highly unusual, something akin to a 41-year-old Olympic swimmer.

ForteCEO, which specializes in placing interim executives with 20-plus years of experience at struggling companies, said that only 5 percent of them are older than 65. Mark Rittmanic, CEO of ForteCEO, said most executives of McCain's generation assumed that at 65 it was time to retire and collect a pension.

A survey of 158 senior business executives by search firm CTPartners found that 47 percent would not hire a qualified 72-year-old as CEO. CTPartners followed up with a separate survey asking executives if they would hire a qualified 47-year-old as CEO. Of the 116 respondents, only five (4 percent) said they would not.

While CEOs almost never get the job at 72, there are those who are effective at that age and beyond. Warren Buffett turns 78 the day after McCain turns 72. Walter Zable, CEO of electronics manufacturer Cubic, is 93. Marriott International CEO Bill Marriott is 76. News Corp. CEO Rupert Murdoch is 77. Kirk Kerkorian, CEO of Tracinda, is 91. Financier Carl Icahn waded into the fight between Microsoft and Yahoo at 72. Oil tycoon T. Boone Pickens is 80.

Sidney Harman, 90, retired at 88 as CEO of audio equipment giant Harman International. The oldest five S&P 500 CEOs left are 77 to 79, practically wet behind the ears. Harman said he walks 18 holes of golf, sometimes 23, and travels every other week between Washington, D.C., and Los Angeles, where he teaches a business course at the University of Southern California.

"Do I detect any difference between now and when I was 70? A little, but there is nothing significantly diminished," Harman said. "Am I a better executive than I was at 47? In some ways, absolutely. I think less in terms of me and more for others. I don't have the same level of enthusiasm, but I can inspire others more easily."

Harman said that it's obvious that he is an exception, and he quotes former New York Mets manager Casey Stengel: "Most men my age are dead."

Dinesh Paliwal, 51, replaced Harman as CEO 13 months ago. Under such youthful leadership, stock in Harman International has fallen 63 percent.

However, as a group, the S&P 500 companies run by the youngest CEOs have been outperforming those run by the oldest. Of the 27 CEOs of S&P 500 who are 47 and younger, 23 have been CEO since the start of 2007. Those 23 stocks are down an average 2.8 percent over 19 months versus a 9 percent decline in the S&P 500 index.

The six companies with CEOs who are 72 and older are down an average of 21 percent.

Conclusions are all but impossible to draw from the portfolios of 23 and six companies, but winners are few among the older CEOs. Nabors Industries, with 78-year-old Eugene Isenberg as CEO, is up 10 percent, but the other five are down substantially over 19 months. Amazon, with 44-year-old Jeff Bezos at the helm, is the runaway leader among both age groups: up 121 percent.

A FIRST FOR VOTERS

Voters have never had to choose between candidates born so far apart.

Bill Clinton won despite being 23 years younger than Bob Dole, but the older candidate has won 24 of 38 presidential elections since a Republican first faced a Democrat in 1856, according to American Demographics magazine.

Presidents since 1951 have been restricted to eight-year term limits, which may make age less of a consideration among voters than it would among company directors choosing a new CEO.

But the tenures are much the same. The average CEO of a large company lasts six years, Gaines-Ross said, and 27 percent of CEOs are gone within three years, according to a study out in June at Rice University.

However, companies like to gamble on the 1-in-20 chance of a 20-year success story, and that won't happen if they bring aboard a septuagenarian.

Young CEOs sometimes acquire a lifetime of experience early in their careers. Pulte CEO Dugas started running the home builder before the ongoing 30-month housing depression began, and company stock bottomed out at $8.20, down from $46.74 in July 2005. Dugas finds himself leading through a business crisis worse than most CEOs see in a career.