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British CEOs in the twentieth century: aristocratic amateurs to fat cats?

Journal: Business History Review

Date: 2024

Author: Robin J. C. Adams, Michael Aldous, Philip T. Fliers, John Turner

Abstract:
This article uses a prosopographical methodology and new dataset of 1,558 CEOs from Britain’s largest public companies between 1900 and 2009 to analyse how the role, social background, and career pathways of corporate leaders changed. We have four main findings: First, the designation of CEO only prevailed in the 1990s. Second, the proportion of socially elite CEOs was highest before 1940, but they were not dominant. Third, most CEOs did not have a degree before the 1980s, or professional qualification until the 1990s. Fourth, liberal market reforms in the 1980s were associated with an increase in the likelihood of CEO dismissal by a factor of three.

Link: Google Scholar

Background and Context

Study Scope

This research examines 1,558 CEOs from Britain's largest public companies between 1900-2009 to analyze how corporate leadership evolved over a century.

Research Methodology

The study uses prosopographical methodology (collective biography) with data from 407 companies across twelve time periods to identify long-term trends.

Key Questions

The research investigates how CEO roles evolved, whether aristocratic leaders dominated British business, and how education influenced pathways to leadership positions.

Late Adoption of CEO Designation in Britain (1990s)

  • The term "CEO" did not become widely used in Britain until the early 1990s, decades after its adoption in America.
  • "Chairman" dominated until the 1950s, while "Managing Director" was also common through the mid-century period.
  • This transition reflected a shift in corporate power toward professional salaried executives rather than company owners or representatives.

Late Professionalization Through Education and Training

  • Most British corporate leaders did not have university degrees before the 1980s, a stark contrast to counterparts in America.
  • The proportion of CEOs with higher education qualifications reached 50% only around 1980 and 80% by 2009.
  • STEM and management/economics degrees only became prevalent from the 1980s, signaling delayed professionalization of management.

Thatcher's Reforms Tripled CEO Dismissal Rates

  • Liberal market reforms in the 1980s significantly increased accountability of CEOs through strengthened corporate governance mechanisms.
  • Forced exits increased from around 10% to 40% of all CEO departures between 1970 and 2000.
  • Average tenure decreased from over 11 years in 1900 to below 6 years by 2000.

Evolution from Corporate Stewards to Professional CEOs

Early 1900s Social Elite Backgrounds Few University Degrees Long Tenure Family Connections 2000s Professional Background Higher Education Shorter Tenure Higher Dismissal Rates
  • Early corporate leaders were often "stewards" with long tenures and stable leadership approaches.
  • Modern CEOs are professional managers subject to stricter performance evaluation and market discipline.
  • This transition was gradual until accelerated by the 1980s market reforms.

Contribution and Implications

  • The stereotype of aristocratic amateur business leaders in Britain is largely a myth, as they were never dominant.
  • Britain's slow embrace of formal education and management training likely impacted corporate competitiveness throughout the twentieth century.
  • Thatcher's 1980s reforms fundamentally restructured corporate leadership, improving accountability but reducing stability through shorter tenures.
  • The proliferation of the CEO designation in the 1990s marked Britain's convergence with American corporate governance models.
  • Understanding this historical evolution provides context for current debates about corporate leadership diversity and qualifications.

Data Sources

  • The designation chart is based on Figure 1 in the article showing changing designations of corporate leaders (1900-2009).
  • Social backgrounds visualization draws from Figure 5, showing proportions of socially elite leaders over time.
  • Education data comes from Figure 6, illustrating the rise of university education and subject specializations among CEOs.
  • Dismissal rates visualization uses data from Figures 3 and 4 on CEO tenure and forced exits.