Becoming the CEO of any organization is a major accomplishment. Within the finance industry, CEOs are responsible for a wide range of tasks, including developing a strategic vision, making key decisions about investments and products, and ensuring that the company stays relevant in our dynamic industry. With this title, an individual can gain a significant level of influence within the organization, along with myriad other benefits. However, while many people within the finance industry world aspire to ascend to the rank of CEO, the best path for getting there is not always so apparent.
The textbook definition of a “perfect CEO” is one that has been rapidly changing. New economic, social, and technological trends have all dramatically altered the hiring environment, creating both new opportunities and challenges across the board. Let’s take a closer look at what it takes to become a CEO in an ever-evolving talent marketplace.
Chief Executive Officer is a Dynamic Position
In years past, the perfect CEO was probably someone who had a hyper-focused skillset. In the financial sector, this likely meant the person had experience as a “true asset gatherer” and was able to commit themselves to doing all they can to maximize shareholder value or were the star investment professional.
Of course, traditional metrics—share price, EPS, ROI, etc.—still play a very important role, especially in the financial sector. CEOs of financial organizations are particularly likely to be judged by hard numbers and are more likely to have their income tied to a tangible figure, such as changes in stock price. But what recent changes in corporate America have demonstrated is that rather than hiring an absolute specialist, today’s boards often value leaders with a broader, multi-faceted skillset.
A quick look at an alumni spotlight, featuring “The Top 100 Harvard Business School Alumni in Finance and Investing” reveals that there are many possible paths to becoming CEO. Jamie Dimon (JPMorgan Chase), for example, worked as an assistant at American Express, before eventually climbing the ranks of increasingly larger financial institutions. Steve Schwarzman (Blackstone), on the other hand, developed his company from the ground up. Ana Botin (Santander Group) continued a family legacy and Jane Fraser (Citi) worked as a partner at McKinsey for a decade before being pursued by Citi over the course of several years.
CEO is a dynamic position, particularly in a rapidly changing economic environment. New knowledge and skill sets are constantly in demand. A LinkedIn study of more than 12,000 revealed that, contrary to decades past, computer science has now become the most common field of study among CEOs (with Economics, Business, Finance, and Engineering rounding out the top five). Interestingly, only 11 percent of top CEOs attended an Ivy League school for their undergraduate degree, which is likely lower than many people would expect. About 30 percent of CEOs have earned an MBA, though this figure doubles, to about 60 percent, for those who are working in the financial sector.
In other words, CEOs are not quite as tied to the balance sheet as they once were in the past—across the board, organizations are looking for individuals with “non-automatable” skills, such as leadership, communication, creativity, and empathy. As the financial sector continues to become more automated and continues to adopt a less active investment profile, these non-replicable skills will become even more important.
New emphasis on Diversity
Corporate America has consistently struggled with diversity, particularly within the highest levels of leadership. There are currently 41 female CEOs at Fortune 500 companies, about 8 percent of the total. This represents a notable increase since 2000 (when there were only 2 female CEOs at these companies) but is still very far from full representation.
Racial minorities are also notably underrepresented at the corporate table. Currently, there are just five Black CEOs at Fortune 500 companies (despite being 13 percent of the US population). Latino, Native American, Asian-American, and other minority groups are also statistically underrepresented.
These trends across corporate America are, as one might expect, broadly reflected within the finance industry. A recent Washington Post report reveled that at JPMorgan Chase, the largest bank in the country, diversity representation has been increasing, though very slowly. Between 2015 and 2018, the share of female executives increased from 25.8 percent to 26.3 percent, while the share of Black executives increased from 2.9 percent to 3.7 percent—both figures are strongly indictive of underrepresentation.
Underrepresentation can be found in just about every sector, including finance and banking. The landscape is changing but it will likely be at least several decades before proportionate representation is achieved. With increased attention being turned to diversity, many large organizations are hoping to change, moving away from the insular promotion models of years past and towards a more holistic hiring process.
In addition to increasing gender and racial diversity, many firms have begun considering other forms of diversity as well—particularly on Wall Street. Having a leadership team with different industry experiences, different functional experiences, different education backgrounds, and different life experiences can help organizations pursue a wider range of opportunities and overcome previous organizational blind spots.
A Fast-Changing Landscape
The Harvard Business Review recently noted, “The path to CEO rarely runs in a straight line; sometimes you have to backwards or sideways in order to get ahead.” Even in finance, the traditional “CFO to CEO Pipeline” is not nearly as ubiquitous as it once was. There are many possible paths to becoming CEO—and whether or not an applicant lands a particular position will often have to do with factors beyond their control, such as timing and large-scale economic changes.
The past two years have sparked a tremendous amount of change. Naturally, the biggest challenge for CEOs around the world has been the COVID-19 outbreak, an event that caused countless organizations to redefine the role of CEO and adjust their long-term management strategies.
But other developments—some of which have taken several decades to unfold—have also persisted. Changes in technology and automation have altered many long-standing positions within the organizational hierarchy, from CEO on down. In the asset management space, even among the very largest (Blackrock, etc.), there has been an ongoing shift away from active investment strategies of years past towards a more passive, consistent, diversified alternative. A typical CEO is no longer primarily concerned with selecting investments but, instead, is now concerned with leading and managing the broader organization.
Ultimately, there is no universal blueprint for what it takes to become a CEO. However, it is clear that those who are willing to develop a diverse skillset, demonstrate a capacity to create value, and adapt to each organization’s unique needs will be the ones who are most likely to succeed.