China’s young talent has seen it dominate the CEO/Cass Business School top 50 for the second year running. However, while younger executives are breaking through, women have yet to make their mark. Steve Coomber analyses the results.
A year on and it is time, once again, for the CEO/Cass Business School annual ranking of up-and-coming CEOs under the age of 45. Although the stereotypical image of the CEO remains the grey haired, 50-something male, and the average CEO of a listed company is in fact still in his mid-50s, it is clear from the research that a new generation of younger CEOs are making their mark in the business world. However, the other stereotype – that of sex – remains strong and women are still failing to break the glass ceiling.
CHINA’S BUSINESS REVOLUTION
As in 2006, the Chinese dominate the ranking, showing that in China at least, age is no barrier to making it to the corporate top spot. Eight of the top ten CEOs in the ranking are in charge of companies listed on the Shanghai Stock Exchange in China, as are 16 out of the top 20, up from 14 last year, and 37 out of the leading 50.
The Cass Top Ten up-and-coming CEOs:
1. Zhengrong Ba, 37 years old, Beijing Tianhong Baouye Real Estate, China
2. Qun Jiang, 44 years old, Youngor Group, China
3. Yu Ge, 44 years old, Liaoning Cheng Da, China
4. Jingfeng Chen, 38 years old, Shanghai DaZhong Public Utilities, China
5. Xiang Zu, 41 years old, Yunnan Yunwei, China
6. Peter J Harold, 44 years old, Sally Malay Mining, Australia
7. Yong Qin, 44 years old, Nanjing Iron & Steel, China
8. Jin Shen, 41 years old, Yunnan Chihong Zinc & Germanium, China
9. Hui Cao, 37 years old, Fuyao Group Glass Industries, China
10. Andrew A Forrest, 44 years old, Fortescue Metals Group, Australia
China’s highflying CEOs have an average age of 47, compared to 55 for the 1,450 CEOs included in the study, and make up some 40% of the 160 CEOs under the age of 45. Heading the 2007 rankings is 37-year-old CEO, Zhengrong Ba, vice-chairman and general manager of Beijing Tianhong Baoye Real Estate. Ba, who graduated in real estate economics in 1990 from Renmin University of China, joined the Beijing Tianhong Group shortly after graduation and became vice-president in 1993 and CEO in 2000. The company, headquartered in Beijing, is a major player in China’s burgeoning real estate business, where property prices in many of the major cities have seen double-digit growth in recent years.
China’s other representatives in the top 50 are drawn from a wide range of industries and geographies, reflecting the enormous economic growth in China across the entire business spectrum. At number three, for example, Yu Ge, 44, (up from seventh in 2006), presides over Liaoning Cheng Da, a conglomerate based in Dalian in China’s Liaoning Province, with interests in textiles and clothing import and export, the biotech sector and financial and commercial investment.
In the number two spot, Qun Jiang, 44, heads up the Youngor Group, headquartered in Ningbo, Zhejiang Province, which is involved in garment manufacturing, textile production and real estate. And Jingfeng Chen, 38, (fourth in the ranking) is in charge of Shanghai DaZhong Public Utilities, headquartered in Shanghai, with interests in gas transmission and distribution, construction, transportation, wastewater treatment and road and tunnel operations.
Outside of China, for young CEOs at least, the US fails to live up to its promise as the land of opportunity. Despite the internet boom over the last ten to 15 years, the average age of an S&P 500 CEO is still 55.5. Only 24 out of 494 CEOs are 45 or under – that is less than 5% and some way behind the UK, for example, at 10% or Australia at 15%.
All the more credit to the young CEOs of companies quoted on the S&P 500, then, as a disproportionate number of them are leading companies that are outperforming the market and delivering excellent shareholder value.
The highest-ranking CEO of a US S&P 500 company is, as in 2006, Jen-Hsun Huang, 44, (20th) founder and CEO of NVIDIA, which supplies graphic chips for a range of hardware, including games consoles such as the SonyPlaystation, as well as computers. It reported record revenues of $2.38bn for the fiscal year 2006, compared to $2.01bn for year ended 30 January 2005.
In fact, 2006 was NVIDIA’s best-ever year, leading the GPU and core logic industry and delivering record annual results, not just for revenue, but also for operating income, operating margin and operating cash flow.
The second-highest placed CEO of a US-listed company had a schoolboy wizard to thank for contributing to the company’s exceptional growth. Pre-sales at Amazon for Harry Potter and the Deathly Hallows, the final volume in the Harry Potter series, were over 2.2 million ahead of the book’s official release in July. The online retailer, with founder and CEO Jeff Bezos, 43, at the helm, sold about one in six Potter books worldwide.
For the quarter ending 30 June 2006, earnings per share for the Seattle-based company were up 280% over the previous year. Sales were up 35% to $2.89bn – the company’s biggest gain since 2004.
It seems that the original dot.com poster child is finally beginning to take significant market share from conventional retailers. The numbers are encouraging: Amazon’s website traffic grew to 49.3 million visitors per month on average in the second quarter of 2007, 8% up on the year before. During the same period, the number of purchases was up 34% at 21.4 million.
THE GLASS CEILING
The Chinese may have broken one corporate barrier, embracing young CEOs in high numbers. In another contentious area of corporate leadership, however, China has yet to set an example.
Regardless of all the talk and wise words about the benefits of diversity, women remain spectacularly under-represented at CEO level. Just 16 out of 1,450 companies included in the research had a female CEO, and only one was aged under 45. At a time when companies profess to be tapping the widest range of talent possible to provide innovation and competitive edge, it is shocking that so few women are in the top job in listed companies. And of the women making the ranking, the highest, Anne Mulchahy, 54, CEO of Xerox, came in at a woeful 353.
For those women with aspirations to lead a listed company, despite the overwhelming odds against success, it is probably best to head to the US. Of the 16 companies with women CEOs, ten were in the US.
REST OF THE WORLD
Looking at the average age of CEOs in the rest of the world outside the US and China, Australia is notable for an above-average proportion of young leaders. Although only four CEOs from companies listed on the Australian ASX 200 index make it into the top 50, 21 of 132 Australian ASX 200 CEOs were under the age of 45, that is 15.9%, significantly above the 11% average across all CEOs.
Australia’s highest ranked CEO is Peter J Harold, 44, (sixth in the ranking) head of Sally Malay Mining, a nickel mining company, followed by Andrew Forrest, 44, (ranked tenth) CEO of Fortescue Metals. Both have benefited from the favourable climate for mining and extraction companies, as well as increased speculative activity in the sector by investors.
Fortescue is involved in iron ore operations in Western Australia and has enjoyed a 400% rise in share price in the 52 weeks to August 2007, without yet having exported any iron ore, although this is likely to change in the near future. Sallay Malay has a large stake in the Lanfranchi Nickel Mine, located in the world-class Kambalda Nickel District of Western Australia, which it is in the process of exploiting.
Further down the ranking at number 45 is an encouraging success story involving the turnaround of one of Australia’s oldest retail brands. David Jones is Australia’s last independently owned department store. Known as DJs, it is the best-known department store in Australia, but ran into difficulties in the 1990s following its listing on the ASX, with shares falling as low as AUS$0.90 from their list price of A$2.00.
In 2003, when the firm made an AUS$25.5 million loss, Mark McInnes, now 41, was appointed CEO at the age of 37. McInnes set about restructuring the company – a process that, while meeting initial resistance, was hugely successful. The retailer reported sales revenues of $1.98bn for 2006–07, up 9%. David Jones has now added over $300m in sales since McInnes’ arrival as CEO.
THE LEADERS OF THE FUTURE
As with any ranking, there are caveats. The CEO/Cass ranking is not an exhaustive list of highflying young CEO talent. Why? For a start, by its nature, it does not cover private companies. Following the private equity boom, there are more large private companies than there were last year, and so some CEOs slip under the radar.
Equally, there are countless family firms and other smaller businesses that are not listed, and so escape the compass of this ranking. Plus, there are also the not-for-profit companies. Many state-owned enterprises in China, for example, have young CEOs at their helm. This ranking does, however, provide a good guide to a number of CEO trends, as well as identifying a cadre of talented young executives, many of whom will prove to be the CEO stars of the future.
The research highlights the willingness in China to appoint CEOs based on merit with less regard to length of service or seniority. It shows how in Japan the average age of the CEO, already significantly older than the rest of the world, is still increasing. This is symptomatic of a system of promotion that may need a radical overhaul if Japan is to restore its economic fortunes. Then there is the dearth of women CEOs of listed companies, an issue which also has to be addressed.
Perhaps above all, however, the most significant fact to emerge from the research is that there is no correlation between age and corporate performance. This undermines any argument that CEOs should necessarily be over 50 because of the wealth of experience they bring to the table. In fact, the study reveals that talent will succeed, regardless of age.
Young CEOs can outperform more experienced CEOs. For a business world in the midst of a supposed talent war, where CEO talent is, apparently, in short supply, maybe more companies should follow China’s lead.