ATOP THE FORTUNE 500: A SURVEY OF THE C.E.O.s The bosses of the FORTUNE 500 and Service 500 are older than their predecessors, work longer hours, and own a surprising amount of stock in their companies.
By Maggie McComas RESEARCH ASSOCIATES Philip Mattera and Brett Duval Fromson

(FORTUNE Magazine) – THE JOB of the chief executive officer at a FORTUNE 500 or Service 500 company seems to be getting tougher. A FORTUNE survey of this elite population, the first in ten years, finds that corporate bosses typically work longer hours than their counterparts did a decade ago, perhaps in part because many more of them are new to the companies they head. They worry most not about lofty issues of policy or strategy, but about the nitty-gritty of competitiveness -- cost containment, productivity. To a degree not fully appreciated until now, their personal wealth depends on how well their companies fare in the stock market. Contrary to what the Boone Pickens types have been saying about honchos with no stake in the outfits they run, these C.E.O.s own a lot of stock in their companies. FORTUNE's survey of the chief executives of the largest U.S. corporations, as represented on the 1985 lists of the 500 largest industrial and 500 largest service companies, drew 512 anonymous responses. We compared the information gleaned with the findings of earlier studies. Data on C.E.O.s at three earlier points -- 1900, 1925, and 1950 -- were taken from a landmark 1955 study, The Big Business Executive, by Mabel Newcomer, then chairman of the department of economics, sociology, and anthropology at Vassar College. Her findings served as the model for a FORTUNE poll in 1976. This year our survey was even more extensive, querying executives on their corporate objectives, how they spend their time trying to reach them, and what obstacles they see lying in the way. Chief executives aren't getting any younger, notwithstanding conspicuous exceptions such as John F. Welch Jr., who became C.E.O. of General Electric in 1981, when he was 45, or John S. Reed, who won the top job at Citicorp in 1984, when he was 45. Not only has the median age of the entire C.E.O. population risen by one year since 1976, to 58, but the age at which the incumbents typically embarked on the job, 50, remained the same as in 1976. This may be partly because fewer companies large enough to make the 500 lists are still headed by their founders. Where younger companies are found -- mainly in the quintile of industrials ranked 401 to 500 -- so are younger appointees. One in five of the C.E.O.s in this group got the job before turning 40, compared with one in ten for all companies. The average number of years the chief executive has spent in his current position has increased a bit, up from just over seven years in 1976 to nearly eight years. While this belies talk about declining job security at the top, patiently climbing the corporate ladder to get there may be riskier: boards are more willing to bring in an outsider to head the corporation. The number of C.E.O.s who were with their companies for less than a year when they got the top job has almost doubled since 1976, from 9.5% to 17%. Moreover, 20.7% of today's C.E.O.s joined their companies at the level of president or chairman, compared with 16% in 1976. TAKEOVERS and mergers may account for some of this flux, but not all. Says Harvard Business School professor John P. Kotter, ''More and more companies are finding that when it comes time to replace the C.E.O., they just don't have the right person within the organization.'' Nonetheless, sticking with one company is still the most common route to the corner office. A third of the chief executives surveyed have had the same employer all their career, and more than half have worked for no more than two companies. Today's C.E.O. is better educated than his predecessors, at least if academic degrees measure education. Nearly 31% of this select population have master's degrees and almost 12% have doctorates. Among the rest, while 26% stopped with a bachelor's degree, another 20.3% spent some time at graduate studies. Over 40% said they wished they had had more academic training, and for all the bad press that MBAs have been getting, 12.7% of the C.E.O.s said they wished they had picked up that degree. The royal road to the top seems to be through marketing or sales jobs. In the current crop of C.E.O.s, 31.6% gained most of their experience in those disciplines, compared with 27.9% in 1976. The next most popular specialty, finance, was the career path of choice for 27%, up slightly from 25.3% in 1976. Although 24.8% of the chief executives surveyed majored in engineering as undergraduates or graduate students, only 9% went on to spend a significant part of their careers in that line of work. Once he gets to the top, the C.E.O. doesn't let up. The executives surveyed typically put in 59 hours a week on the job, significantly more than the 55.7 hours reported in 1976. They spend 22.5% of their time alone reading reports or correspondence, 26.1% in meetings with other managers, and 13.4% on the phone. Clearly the board of directors and other top managers in the company are first in line for the C.E.O.'s attention; 90% of the chief executives cited these groups as occupying a significant amount of their time. Lower-level employees? They get a significant measure of the big boss's time from only 35.5% of C.E.O.s, and from a mere 25.6% of those heading the largest 100 industrials. ''That's certainly not what you'd call 'management by walking around,' '' notes Henry Mintzberg, a professor of management policy at McGill University in Montreal and an authority on how executives use their time. ''Chief executives spend a lot of time with people like themselves,'' he observes. Avidity for financial results shows up in the answers the C.E.O.s volunteered when asked to describe their ''most important objective'' -- the only completely open-ended question in the survey. Maintaining or improving profitability, listed as the primary goal by 36.7%, outranked every other objective. It may be telling that chief executives think first of the bottom line rather than of what it takes to get there: ''They seem more concerned with the results of solving problems, but not the problems themselves,'' says Robert H. Hayes, a Harvard Business School professor who specializes in manufacturing. Only a dozen of the 512 listed customer satisfaction as their primary objective, and only 11 volunteered that their main goal was matching or surpassing the competition in products, service, or technology. Gone are the days when rapid inflation allowed companies to raise prices almost automatically, thereby covering up a host of problems on the cost side. Asked to rate several issues as of ''great,'' ''some,'' or ''little'' concern, C.E.O.s overwhelmingly picked cost containment as their principal worry. Productivity came next, then employee motivation. Regulatory constraints were rated less troublesome today than in 1976, when big government was the most frequently cited problem. Yet bureaucratic hamstrings are still of great concern to 43.9% of C.E.O.s. An even greater proportion of executives in industries still subject to varying degrees of regulation worry about bureaucratic meddling: 95.7% of utility company chief executives, 79.3% in life insurance, 73.2% in commercial banking. More C.E.O.s today are willing to claim allegiance to the two major political parties than in 1976, and they know how to put their money where the policymakers are: 94.1% contributed to a congressional campaign in the past two years, 63.7% through company political action committees. C.E.O.s of utilities, commercial banks, and life insurance companies are the most prominent PAC men: 100%, 83.9%, and 82.8%, respectively, contributed this way. If the C.E.O.'s job has gotten tougher, the financial rewards have accordingly become more handsome. The median total compensation in 1985 for the C.E.O.s surveyed, including bonuses and profit sharing, came to $543,400. That's more than double the 1976 median of $209,000, representing a rate of increase that outstripped the nearly 100% rise in the consumer price index. The relationship of executive pay to corporate performance? For C.E.O.s of the industrial companies, compensation increased by 25.3% over the decade, adjusted for inflation. Return on shareholders' equity, on the other hand, which 42.2% of C.E.O.s rated as the best single measure of corporate performance, declined for the FORTUNE 500 as a group, from 13.3% in 1976 to 11.5% last year. Repeating the pattern of a decade ago, compensation among the industrials closely follows company size, from a median $931,800 for the C.E.O.s of the top 100 to $447,600 for those whose companies ranked 401 to 500. The highest paid in the service sector are the retailers, with a median total C.E.O. compensation of $700,000 last year. Even brighter in the palette of executive wealth are actual and potential stockholdings. Stock options were reported in terms of the pretax gain on options that could be cashed in soon. The executives typically had options worth $554,000. Options already exercised and outright stock grants have also added to the corporate chiefs' holdings of their companies' stock. When FORTUNE surveyed C.E.O.s in 1976, 29.8% reported holdings with a market value of $1 million or more. This time 51.6% have a seven-figure stash, although ten years of inflation makes membership in the millionaires' club worth considerably less today. Eighteen percent of the C.E.O.s reported holdings worth $5 million or more. Many C.E.O.s can fall back on another financial cushion if trouble should arise. Nearly 36% have employment contracts that provide severance pay for dismissal ''without cause'' or due to a ''change of control.'' Either provision serves as a golden parachute in the event of a takeover. Threats from raiders are of ''great'' or ''some'' concern to 64.5% of C.E.O.s with golden parachutes, but to only 41.2% of executives without employment contracts. Presumably it is executives who feel takeover threats looming who seek financial protection in the first place. Golden parachutes are relatively new, but then for most companies so is , the threat of takeover. There are, however, a few things that haven't changed much about the C.E.O. population. Notable among them, as you can tell from published reports if not from the anonymous responses to the survey, is that over 99% of chief executives are men. The only two exceptions among the FORTUNE 500 and Service 500: Katharine Graham of the Washington Post Co. and Marion O. Sandler, who shares the C.E.O. job at Golden West Financial Corp. with her husband.

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