Back when I was planning my life (OK.  I’m still planning my life- it’s just more done than years past), I wondered when I was done getting my PhD in Chemical Engineering, what other degrees I should seek   One of the possibilities was getting an MBA (Masters of Business Administration), if I planned to work in industry and not be a professor for the rest of my life.  (Since I planned to invent two new products a year, it wasn’t clear that a professorship would mesh well with such a lifestyle.)

As my career progressed, I was thrilled to see the plethora of other PhD ChemE’s, who were leading their enterprises to great heights. 

Which brings up the subject of today’s post.

The Harvard Business Review (HBR, one of the finest management magazines around, MIT’s Sloan Management Review is another, Strategy+Business rounds out the pack [this latter one was a publication of Booz-Allen-Hamilton before it split into separate companies; now it’s a publication of PriceWaterhouseCoopers) routinely rates the world’s top performing CEO’s.

As opposed to rating them by how much money they make, HBR measures performance based upon the long-term results of their enterprises.  So, a long tenure is far more desirable than a one year stand.  The magazine evaluates firms in the S&P [Standard and Poor’s] Global 1200, who have had a CEO in place for at least two years- and have no criminal record.  (The CEO also could not have resigned, died, or been fired prior to 30 June 2018, for this year’s inclusion.)

HBR uses three metrics- (a) total shareholder return (TSR, including reinvested dividends), which obviates local stock market variances; (b) industry-adjusted TSR, which eliminates gains that may come about because a certain industry is “hot”; and (c) change in market capitalization (adjusted for new share issues and buybacks of stock), in  inflation-adjusted currency.  Additionally, ESG (environmental, social, and governance) metrics (developed by Sustainalytics and CSRHub), which were weighted at 10% each with the financial performance manifesting 80% of the ranking value.  (ESG includes lobbying expenditures, carbon use, sustainability issues, among other variables.)

The executives were ranked on each metric and then  the three  metrics were averaged to develop the overall rank (from 1 to 881).  Since 2013, only six CEO’s have continually repeated (Jeff Bezos- Amazon, Washington Post; Pablo Isla (Inditex), Blake Nordstrom (Nordstrom); Paolo Rocca (Tenaris); James Taiclet Jr (American Town)and Renato Vale (CCR).  32 of those on the list have MBAs, and 34 are engineers.  (Eight had both degrees!)

This is the second year in a row that engineers have comprised the largest segment of the list.  (Last year, the tallies were 29 and 32, respectively.)

HBR attributes this trend (when the list began,  the top CEO’s primarily sported MBA’s, few  had engineering degrees) to the increasing technical nature of business and the fact that technology firms are joining the industry behemoths.  After all, engineers have significant background in problem solving, structural thinking methodology, and analytical skills.

For example, the head of the Intercontinental Exchange (the entity that owns the New York Stock Exchange) is led by Jeffrey Sprecher. Sprecher is one of those that has an engineering background, along with an MBA.  But, he also states that while he has never held a job that was directly related to his Chem E background, he’s never not held a position that didn’t demand his problem solving, complex system analysis, and interrelationships between those two aspects.  (All of which are ChemE basics.)

(Note:  There could be another reason for these results.  Including an ESG rating tends to inflate the census of European firms in the roster.  And, European firms are more likely to be headed by engineers; American firms- still- are more often MBA led. After all, only about ¼ of  the CEO’s in the S&P 500 and the Fortune 500 [26.4%] had engineering degrees.)

Better join my efforts in stressing the need for STEM choices for our next generations of kids.  As firms become more global in nature- and rely on more and more technology- those skills will be clearly in demand.

Happy Halloween to those who so indulge.  Which means my special offer for business owners and operators is almost at an end.  (You can find the offer here.)   It starts with purchasing my book that explains how the new tax law affects everyone- detailing the personal and business tax law changes.