Wednesday, November 30, 2005

Who's in the Corner Office?

By DAVID LEONHARDT
New York Times
In ways less obvious than race and gender, the corporate elite has become less elite and more diverse over the last decade or two, while its counterpart in Washington has become more homogeneous.
November 27, 2005


ON some levels, corporate America can learn a lot about diversity from the nation's political elite.

When, in 1967, Thurgood Marshall became the first African-American to be nominated to the Supreme Court, Franklin D. Raines was just finishing high school in Seattle. More than three decades would pass before Mr. Raines, at Fannie Mae, became the first black chief executive of a Fortune 500 company.

Today, the corner offices of the nation's largest companies are dominated by white men in a way that few other parts of society still are. Only a handful of women hold prominent chief executive jobs, while 81 women are in Congress. There are more female senators from Maine (two) than there are women running Fortune 100 companies (zero).

Yet the full picture is not as simple as all this suggests. In ways less obvious than race and gender, the corporate elite has become less elite and more diverse over the last decade or two, while its counterpart in Washington has become more homogeneous.

They may be paid like kings, but C.E.O.'s seem to come from a wider variety of economic backgrounds - with growing numbers rising from humble beginnings and fewer having attended Ivy League colleges - than they once did. Many spent just a few years, or none, at their companies before becoming the boss. Being younger than 50 no longer rules out someone for the top job.

"There's much less emphasis on the cosmetic aspects and the cultural aspects and the refinement aspects, as opposed to the down-and-dirty, get-the-job-done aspect," said Gerard R. Roche, an executive recruiter for 41 years, whose firm, Heidrick & Struggles, has recently conducted chief-executive searches for Coca-Cola, Disney and Nike.

Wall Street, for example, was once seen as a club for the well heeled; today it seems much more open. James E. Cayne, the chief executive of Bear Stearns, didn't graduate from college. E. Stanley O'Neal of Merrill Lynch, one of just three black chief executives of large companies, went to Kettering University in Flint, Mich. Kenneth D. Lewis of Bank of America graduated from Georgia State.

With the glaring exceptions of sex and skin color, in other words, the mold for a big-company C.E.O. has been broken, and there isn't a new one to take its place. The story is different in Washington, where political leaders are richer, older, more likely to have gone to an expensive college and more likely to have first held another elected office than they were in the past. So in some ways, corporate leaders now mirror the rest of society more closely than elected leaders do.

IT is almost as if two separate meritocracies have sprung up. The top of the corporate one remains largely closed to women and minorities. But it also rewards skills - like communication, real-world smarts and a common touch, executives say - that require little in the way of a privileged background.

"I think of the people at Whirlpool who failed over the years, and it rarely had to do with their technical skills," said David R. Whitwam, the company's former chief, who worked his way through the University of Wisconsin emptying bedpans as a hospital orderly. "It was usually their leadership capabilities."

The rules for advancement in the political system are different. They bear some resemblance to those of the college-application process that many 17-year-olds are now sweating. Women and minorities, both racial and religious, succeed far more often than they did in the past. The Senate now has almost twice as many Catholics - 24 - as it did in 1980, and more Jews and Mormons, too. (Data on the religious background of C.E.O.'s isn't readily accessible.)

But whether the goal is winning a seat in Congress or a spot in Harvard's freshman class, wealth appears to be more important than it once was. And the types of analytical skills that rarely make the difference at Whirlpool help determine both admissions decisions and Supreme Court nominations.

Not since Richard Nixon in 1969 appointed Warren Burger, who had attended the University of Minnesota, has the court had a new justice who attended a public university for college or graduate school. Since then, every new justice has held a degree from one of four universities: Harvard, Yale, Stanford or the University of Chicago. Judge Samuel A. Alito Jr., who is preparing for confirmation hearings, graduated from Yale Law School and Princeton.

In fact, the changing educational backgrounds of the corporate and political elite may best sum up the trends. In 1980, about 23 percent of chief executives at big companies had attended one of the eight Ivy League colleges, while only 13 percent of senators had. The boardroom, not surprisingly, was a more elite place than the halls of democracy.

Today, the two groups have switched places. The number of senators educated at an Ivy college has risen to 16. Among C.E.O.'s in the Standard & Poor's 500, the share has fallen by more than half, to 10 percent. The University of Wisconsin has tied Harvard as the most common alma mater for top executives, according to Spencer Stuart, an executive search firm.

This is particularly telling because students at Ivy colleges have changed relatively little - in economic terms - over the last few generations. The same is true at other elite colleges like Duke, Stanford and Williams. If anything, the percentage of them coming from middle-class and working-class households has fallen slightly in recent years, recent research shows. At Harvard, for instance, the median family income was about $150,000 last year, financial aid forms suggest.

So the colleges offer a rare way to examine the shifting class backgrounds of the nation's elites. The changes seem to say something about both the business world and the colleges themselves.

At a time when the economy was not so brutally competitive, when there was less global trade and when technology had not ripped down the barriers between industries, companies could afford to draw from a relatively narrow talent pool, executives and recruiters say. That isn't the case today.

"Businesses are more complex. God knows they're much larger than they ever were before," said William W. McGuire, chief executive of UnitedHealth Group and a University of Texas graduate. An Ivy League degree "opens doors," Mr. McGuire said. "I'm just not sure that opening doors is tantamount to success in today's world."

The change is not limited to the United States. The number of top executives in Britain who graduated from its most exclusive colleges, Oxford and Cambridge, declined from 1992 to the early part of this decade, The Economist found.

Thomas J. Neff, chairman of United States operations at Spencer Stuart, said he could not remember the last time a client doing an executive search had asked him to focus on graduates of particular colleges.

"I think if a C.E.O. or a board member went to an Ivy League school, there might be a bias. But it's small," Mr. Neff said. "When it comes to senior level appointments, it's 'What have you done for me lately?' "

Executives who attended public universities also say that these campuses bear a closer resemblance to the rest of society than those dominated by the upper middle class. Many of the executives went on to business school at Harvard or Stanford, but they say that their undergraduate experience also helped prepare them for the business world.

"When you look at today's C.E.O., he or she has to be very comfortable talking about the business with folks on the factory floor or customers who are increasingly diverse," said Robert A. Eckert, the chief executive of Mattel and a University of Arizona graduate. "While private schools have the advantage of smaller classes and the financial wherewithal to attract the world's greatest faculty, the public schools offer the diversity and variety that go along with the size they have there."

The high-income students at the Ivies and similar colleges, meanwhile, have been showing less interest in corporate America. First, the antiwar movement of the 1960's and 70's made a business career unappealing to many. About the same time, colleges were changing admissions policies to give more weight to academic skills, said Jerome Karabel, a fellow at the Longview Institute and author of "The Chosen," a history of college admissions.

Capitalism is more popular on elite campuses now than it once was, but many students there still do not see corporate jobs as the best match for their skills. Instead, many turn to law, consulting or hedge-fund management. These fields tend to value skills at which the students have long excelled - skills that can often be measured objectively. Minorities have done better in some of these professions than in corporate America. The pay in these fields also tends to be higher for younger employees, and a career rise can happen quickly.

"The most able students interested in business are increasingly finding their way into entrepreneurial activity, into financial services, into high tech and into consulting," Lawrence H. Summers, Harvard's president, said. "Joining large organizations is no longer the major choice for students interested in business."

Frederick W. Smith, C.E.O. of FedEx, attended Yale in the mid-60's and recalls being surrounded by sons of coal and steel executives. In recent years, he has spoken with Yale's president, Richard Levin, about encouraging students to join corporations. Students "are more interested in Wall Street rather than in manufacturing, transportation and so forth," Mr. Smith said. "They're much more interested in government. They are much more interested in the media."

Not only are they interested in government, but running for office often requires wealth that is common among Ivy League students and alumni. Many candidates spend hundreds of thousands of dollars on their campaigns, and sometimes much more.

Voters now seem to care less about a candidate's background - economic, religious or otherwise - and more about his positions, said Brandice Canes-Wrone, a politics professor at Princeton. The best example may be the willingness of evangelical Protestants to vote for conservative Catholics. But the rise of wealthy politicians from elite schools makes the point, too.

There are almost as many millionaires in the Senate as nonmillionaires, according to Roll Call, a newspaper covering Capitol Hill. Since 1988, 9 of the 10 major-party nominees for president have held a degree from Harvard or Yale, the only exception being Bob Dole. In the previous 24 years, only 1 of the 12 nominees went to Harvard or Yale. That was Gerald R. Ford, who received a law degree from Yale.

"By traditional measures, we have an elected and appointed elite that is more representative of the American public," said Larry J. Sabato, of the Center for Politics at the University of Virginia. "Yet in many ways they're less representative."

Of course, it is hard to argue that C.E.O.'s are representative of the public when almost all of them come from the roughly one-third of Americans who are male and white.

"Clearly, it's an area where there's work to do," Mr. Eckert of Mattel said. "We haven't yet achieved the diversity of our work force and our customer base."

For all the differences between the corporate and political elite, this may be the biggest similarity: both seem to be missing out on a lot of potential talent.

Luke Kummer contributed research for this article.

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