Nicolas Garcia

Does University Education Determine Corporate Success?

We perceive our nation to be ruled by government figures, both elected and appointed, but another entirely separate group of leaders from the business world influences from the sidelines every position our government takes. This group is composed of the corporate elite: top CEOs in charge of some of the largest companies in the world. We imagine these powerful corporate elites to be the top graduates of the top universities. It is easy to assume they all studied business in the finest institutions and pursued the corporate craft well into graduate school. Is it true? Does university education lead to corporate success? Its imperative for us, as economic serfs, to learn how the corporate elite came to claim their positions. First, its important to define what measures corporate success. While the label could pertain to any high-ranking individual in a corporate setting, this paper looks almost exclusively at Fortune 500 CEOs because they are the most successful individuals in the corporate world. Their backgrounds will give the most reliable information as to what leads to success. The intuitive response to my thesis question would be yes: the more and better educated a potential businessman is, the more likely he is to become a Fortune 500 CEO. But the real answer is actually no: university education does very little to determine corporate success. But how does education become such an insignificant factor? We begin by looking at the CEO educational factors from two sides. First, the statistical trends of these CEOs educational backgrounds must be analyzed. By doing this, it is possible to see what aspects of a CEOs education are not essential to his corporate success; traits that are not universally shared by all CEOs are not integral to their level of success. Secondly, and more importantly, what did the CEOs themselves

Nicolas Garcia

Does University Education Determine Corporate Success?

have to say about their educations? Their retrospection would provide information on how university education relates to corporate success. Between the statistical analyses of the Fortune 500 CEOs educational backgrounds and the CEOs own insights, it becomes clear that university education does not determine corporate success. Important trends in Fortune 500 CEO education are found in the collected education statistics of the CEOs. As stated above, intuition tells us that the high-level CEO will always be thoroughly educated, but the data does not concur. While 93% of Fortune 500 CEOs do possess at least an undergraduate degree of some sort, slightly more than 6% have just a high school diploma or less (one CEO has just an Associates degree). The average Fortune 500 CEO will have at least a bachelors degree, but the fact that 32 of the studied CEOs made it to their position without any college experience whatsoever means that having a college degree is not necessarily essential. (Abels, Martelli) Beyond the total education level, its important to note that not every institution provides the same caliber of education. Its easy to think that Americas corporate leaders have all been educated in the most prestigious universities, but looking at the data compiled by Janis Dietz, we see that only 63 (13%) of the 496 university-educated CEOs received their degrees from Ivy League schools. Most of the CEOs graduated from either regional schools (157 CEOS, 37%) or state universities (144 CEOs, 30%). Thirty-three CEOs (6.5%) graduated from either a military institute or foreign school. There is an unaccounted-for figure here: the university records for ninety-seven of the Fortune 500 CEOs were unavailable. Twenty percent of the CEOs undergraduate history is unknown; those ninety-seven mystery CEOs could have graduated from any institution type.

Nicolas Garcia

Does University Education Determine Corporate Success?

However, even if all these unaccounted-for CEOs graduated from Ivy League universities, the majority of the whole group would still be composed of graduates from state and regional schools. This means that graduating from a prestigious school is not an essential ingredient for Fortune 500 corporate success, and the caliber of university does little to determine the success of the potential CEO. The next detail to address is how many of these CEOs were actually business students as undergraduates. While the trend emerging here indicates that general intuition about Fortune 500 CEOs educational backgrounds is inaccurate, in this case its not entirely off. According to research done by Patricia Abels and Joseph Martelli, 221 (47%) of the CEOs majored in some sort of Business, followed by Engineering/Technology majors at eighty-nine CEOs (19%) and Liberal Arts majors at 89 (16%). Another significant chunk of CEOs were those with science degrees, numbering at 41 (9%). Uncertainty persists in this area as well, because while less than 1% of the CEOs majored in a discipline not listed here, roughly 8% (38 CEOs) are unknown as to their major. The largest chunk of Fortune 500 CEOs were business majors, but they still did not quite represent half of the CEOs with undergraduate degrees. Therefore, having a business degree is not essential to becoming a high-level CEO. Abel and Martellis data on overall education level of Fortune 500 CEOs reveals a significant chunk of Fortune 500 CEOs with graduate degrees. While its not safe to say that all these graduate degrees were earned in business - those CEOs with non-business undergraduate degrees may have gone on to receive non-business masters degrees business students were the largest demographic in the last data set, and masters degrees in

Nicolas Garcia

Does University Education Determine Corporate Success?

business areas are the most common. For these reasons, I next looked at what the business students specialized in for both their undergraduate and graduate degrees. Economics was the most common undergraduate business specialty at 30%, followed closely by Business Administration at 29% and Accounting at 23%. Finance and Marketing were not as popular, at 10.5% and 3.5%, respectively. Of the graduate specialties they chose, Masters in Business Administration was most popular. Seventynine percent of the business students who pursued masters degrees received MBAs (174 CEOs). No other graduate business specialty went above 10%.(Abels, Martelli) It makes sense. MBAs are generally the most common graduate degrees across all fields. While this information is more in line with what one might guess about Fortune 500 CEOs, these figures represent only those CEOs who pursued graduate degrees, which is still fewer than expected. This information, while relevant, is slightly out of date. The sources used here compiled this information in 2010, and their data sets are the most recently analyzed figures regarding the educational backgrounds of Fortune 500 CEOs. Some corporations on the Fortune 500 list may have been replaced in the last three years or some corporations may now have new leaders in some positions. Demographics may be different, but the change wont be considerable: three years is not enough time for a completely new leadership change in companies that are mostly old and traditionbased and where executives tend to stay in power for many years. For the purpose of this paper, the 2010 information is adequate. Empirically speaking, the statistical trends clearly state that the university education of a CEO does not do much to determine his corporate success. There are no

Nicolas Garcia

Does University Education Determine Corporate Success?

significant correlates among college major, caliber of school, or number of degrees that form a foundation for becoming a Fortune 500 CEO. Now we consider what the CEOs themselves say about how their educations affected their success. While many CEOs are happy to give management and lifestyle advice to the potential business leader, very few have spoken specifically about how their education got them to their positions. It may be because they dont like the idea of giving credit for their success to an institution. More likely it is because their educations simply werent significant factors in their success. For the sake of including more well-rounded opinions as to how education might be key, this paper also considers the opinions of top CEOs from Europe, who seem to have more to say about education-related success. Nevill Ivester, former CEO of Coca-Cola, said this about the choice of a college major: I would want to teach students to understand different backgrounds, cultures, religions, and perspectives, even if those perspectives are antithetical to their own . . . More importantly, they must also have a sense of curiosity. (quoted in 2008). This may explain why top CEOs are not exclusively business majors. A common theme for what comprises proper education for a CEO is the combination of multi-disciplinary abilities and international exposure. In her article High Potentials: A CEO Perspective, Jeanine Hermans interviewed three prominent European CEOs: Trude Maas, CEO of HAY Group; Lars Kolind, former CEO of Oticon; and John Neervens, CEO of ABP. She asked CEOs about what traits potential CEOs need and how education affects the growth of these traits. They agree that a CEO-conducive education includes study abroad programs and internationally oriented studies not only for an international business leader, but any domestic CEO as well. To them, high potentials (potential high-end business leaders)

Nicolas Garcia

Does University Education Determine Corporate Success?

must be educated to approach issues from many perspectives across many disciplines. (Dietz) While the European business voices preach the importance of an education for making the potential business leader well-rounded, they also have many issues with modern universities. Universities need to implement peer mentorship and advisory programs to monitor students multi-disciplinary and ethical growth. The latter is especially important because a CEO must make choices within the constraints of the companys social and ethical responsibilities. Also, universities put too much focus on giving students knowledge without stimulating the students natural curiosity; while many universities require research assignments, too many of these consist of students simply regurgitating information they had no hand in generating. This style of research has little benefits for the potential CEO. The high-potential leader must have the curiosity and endurance to pursue original research and the confidence to complete and deliver it. (Hermans) The shortcomings in modern universities may explain why so few top CEOs give credit for their success to their universities. The less-than-optimal academic environments may explain why university education has little positive effect on a potential CEOs corporate success. One voice that advocates the importance of education is Scott Tappin, CEO of Xinfu and financial confidant to many Fortune 500 CEOs. In his article The Secret: How to Become a Fortune 500 CEO, he states that the more education a potential CEO can get, the better. However, in regards to graduate school, he believes that a Masters in Business Leadership (MBL) is worth more than a Masters in Business Administration

Nicolas Garcia

Does University Education Determine Corporate Success?

(MBA). Rather than learning the technicalities of operating a business, CEOs to-be do better by focusing on their leadership/social abilities in a complex organization. Realistically, these abilities are not targeted explicitly by general university curricula (outside of MBL programs). What traits benefit a CEO most? In the simplest terms, the CEO manages the company from the highest level; he makes the biggest decisions and sees the biggest picture of whats best for the company. The CEO must have extraordinary leadership skills, in addition to social ability, negotiating ability, and an expansive network. An extremely important but overlooked trait of CEOs is empathy, understanding the corporation from the customers or investors point of view. These are not traits that are intentionally boosted by most universities. While these skills are introduced at universities, they are built and refined by experience, not any curricula. It is obvious that a CEOs personality traits form the integral component in his potential rise to success. This prompts us to ask, what are the universal personal themes of Fortune 500 CEOs? Can the impotency of university education be blamed on its inability to nurture these traits in growing entrepreneurs? The European CEOs all agree that in order to be an elite corporate leader, high potentials must have the following traits: creativity and outside-the-box thinking; endurance; empathy; ethical integrity; confidence; and above all, the guts to act (Lars Kolind, former CEO, Oticon). The CEO can function in a complex organization and manage diverse, potentially international teams. The CEO performs honest selfevaluations and knows how to handle personal failure and disappointments.

Nicolas Garcia

Does University Education Determine Corporate Success?

With the exception of ethical integrity, these traits are generally what we expect to see in a top CEO. By their nature, these are character aspects that are not refined in the classroom, and at any rate, its understood that educations priority is the transfer of knowledge, not the maintenance of personality traits. Realistically, a college education only offers two boons to the budding CEO. First, a university education gives the CEO a degree. This is necessary because a CEOto-be obviously cant climb the corporate ladder without first gaining employment in the company, and most employers nowadays wont even consider employing someone without at least a bachelors degree. Second, and more importantly, the college education represents opportunities to lead in campus groups and clubs. It is at the universities that potential CEOs begin building their networks and refining their social skills and management abilities. These near-essential ingredients to business success offered by universities can be attained with just a bachelors degree. The statistics make it evident. While having at least a bachelors degree is not 100% essential, almost all of the Fortune 500 CEOs have one. If having a degree were not a prerequisite for being employed by a large corporation, the university might be completely taken out of the equation, supposing that opportunities to build networks and leadership abilities can be found outside an academic environment. This may explain why thirty-two of 2010s Fortune 500 CEOs didnt have a college degree. Statistically, a bachelors degree is a near-prerequisite; most CEOs have completed undergrad education.(Abels, Martelli) But the statistics in total reveal that none of the educational details commonly associated with the corporate elite are essential.

Nicolas Garcia

Does University Education Determine Corporate Success?

Advice given by the CEOs reflected the statistics: potential CEOs should get an education that it is multidisciplinary and results in the potential CEO gaining leadership and social experience.(Hermans) However, most CEOs had little to say about how their education affected their success, and the European CEOs had considerable criticism for modern universities. The implication here is that once universities adopt education tactics targeting entrepreneurial and leadership skills, education will become a significant factor in determining corporate success. For now, however, its influence is limited. Looking at the topic in the simplest terms, it makes sense that a Fortune 500 CEO could gain that prestigious position without a specific educational curriculum. The actual education provided by the universities does not make the CEO; it is the sum of opportunities and experiences to lead and network offered by the school that contributes to the genesis of a corporate leader, provided that the potential CEO seizes such opportunities. With just a bachelors degree, anyone with the appropriate CEO personality traits could potentially become a corporate elite. The criteria for success are highly sought after details, since acquiring these traits is obviously the most effective way of becoming successful. To those who are curious or interested in the path to corporate success, it is helpful to know that neither getting into an Ivy League school nor majoring in business is important. It is much more beneficial to a potential CEO to develop leadership and social abilities by leading and managing student organizations, and by making many smart connections with peers. This information will give us a better understanding of how to educate future generations of business leaders.

Nicolas Garcia

Does University Education Determine Corporate Success?

References:
Dietz, J. (2010). THE MYTH THAT COLLEGE AND MAJOR CHOICE DECIDES JOHNNY'S FUTURE. College Student Journal, 44(2), 234-249. Hermans, J. (2007). High Potentials: A CEO Perspective. Journal of Studies in International Education, 11: 510. doi:10.1177/1028315307304187 Martelli, J., & Abels, P. (2010). The Education of a Leader: Educational Credentials and Other Characteristics of Chief Executive Officers. Journal Of Education For Business, 85(4), 209-217. doi:10.1080/08832320903449592 Tappin, S. (2013 July 11). The Secret: How to Become a Fortune 500 CEO. LinkedIn.com. Retrieved November 7, 2013, from http://www.linkedin.com/influencers/2013071109292413518874-the-10-secrets-to-becoming-a-fortune-500-ceo