Category Archives: The CEO

The CEO Story, from Profitability Crisis to Polycrisis

Michael Roberts’ historical chart of the G20 rate of profit.

I’ve written a little about the the invention of the CEO — the title, the office, and the social position described by that term. This chart from Michael Roberts’ blog showing the declining rate of profit can help reframe that discussion.

In this view, the term “CEO” first comes into use in the midst of the profitability crisis, in the late 60s and 70s, after the postwar Golden Age. The CEO’s heyday runs through the neoliberal recovery. The Fall of the Celebrity CEO (to borrow a term from Edelman) coincides with the start of the Long Depression.

Unfortunately, Roberts’ chart doesn’t run up to the present, which would show the rate of profitability continuing its decline in the face of multiple, entangled, global crises all at once, a polycrisis:

A global polycrisis occurs when crises in multiple global systems become causally entangled in ways that significantly degrade humanity’s prospects. These interacting crises produce harms greater than the sum of those the crises would produce in isolation, were their host systems not so deeply interconnected.

Having helped steer society to this precarious juncture, has the institution of the CEO now run its course? And what would it take to reinvent it, so that the business enterprise can help address the overlapping crises we face, improve humanity’s prospects, and play a constructive role in a new social contract? 

CEOs Are Not The Policy Leaders We Need Right Now

No distancing at Trump’s declaration of national emergency. CEOs are too close for public comfort.

Mike Lindell, better known as the My Pillow Guy, probably cut the most absurd and alarming figure among the CEOs standing with Donald Trump at his March 31st coronavirus press conference. A TV huckster and a religious zealot, Lindell declared from the White House podium that Trump had been elected by God’s grace, and he promised that his “uniquely positioned” and “empowered” pillow company would soon be producing about 50,000 cotton face masks per day. Though Lindell may have come off as a kook, it is hard not to appreciate the alacrity of his business pivot, and there’s no doubt we’ll need more face masks on the market, especially now that the CDC is coming around to the sensible view that masks should be essential wear.

Lindell’s outlandish behavior also draws attention to a disturbing pattern: the administration is trying to outsource the federal pandemic response to the private sector. This was the clear message when Trump declared a national emergency on March 13th, standing shoulder to shoulder with CEOs, not with medical or scientific experts or economists or seasoned administrators who know how to marshal government resources in emergencies. On Slate, Seth Maxon put it bluntly: “Trump Seems to Think a Bunch of CEOs Will Save America From the Coronavirus”; but maybe even that wasn’t blunt enough: Trump and the Trump administration have repeatedly made it clear that the federal government will not and should not lead the public health response; they are so callously laissez faire that they are abdicating the responsibilities of government, or handing the reins of government over to the private sector, while the states scramble for the resources they need.

The pattern has been in place for decades, of course. Now, we are reaping the whirlwind that anti-government ideologues and kleptocratic predators have sown since the 1970s. In some areas, the current administration has simply vacated government offices and diminished the administrative capacity of agencies; in others, they have allowed the private sector to direct and usurp the ordinary functions of federal government; and on nearly every public policy front, they defer to and entrust the public welfare — our common wealth, our public health, and our collective future — to CEOs.

This has been the case from the earliest days of this administration: in February of 2017, for example, Trump signed an executive order that allowed for broad regulatory rollbacks and, in a symbolic and premonitory gesture, handed the presidential pen to Dow Chemical CEO Andrew Liveris. Just one month later, then-EPA administrator Scott Pruitt handed Liveris another gift, when he announced the EPA would not ban the pesticide chlorpyrifos despite clear scientific evidence of its toxicity. Murray Energy’s Robert Murray had even greater influence, presenting the administration with a wish list — “an action plan” — that included pulling the United States out of the Paris Climate Accord and revoking the Clean Power Plan.

After Trump announced his intention to withdraw from Paris, Apple’s Tim Cook, known to the president as Tim Apple, said he could not step down in protest from Jared Kushner’s Office of American Innovation because he’d never joined it in the first place; but in February of 2019, he joined Ivanka Trump’s American Workforce Policy Advisory Board, along with Marillyn Hewson of Lockheed, Ginni Rometty of IBM, Walmart’s Doug McMillon, and Home Depot’s Craig Menear, among others. The board was formed to make sure “all Americans can participate in the opportunities created by the booming economy,” according to the president’s daughter; it’s unclear what they are doing — or if they are doing any policy work at all — now that the boom has gone bust.

It’s doubtful this board was ever meant to do any serious policy work, or that it could even if it tried. That’s not a knock on the participating CEOs. They may have joined with the best of intentions. There are CEOs today who sincerely want to do more to address social inequities and environmental degradation and are committed to the idea of stakeholder as opposed to shareholder capitalism. These are still aspirations, however, not business requirements, and they will remain aspirations without a major rethink and reorganization of the business enterprise. Meanwhile, CEOs have other, competing priorities, as well as a fiduciary duty to uphold. To the extent they must focus on short-term financial results, CEOs simply do not and cannot act primarily in the broad, long-term public interest — even if sometimes business and the public interest happen to coincide, as they might, at the moment, for Mike Lindell.

The C-Suite is not a public office and the CEO is not the model of public leadership we need.

The notion that success in the private sector makes someone suited for public office has been a source of endless mischief since at least the 1980s. People wrongly consider the president America’s CEO and the presidency a job; CEOs think they can be president; CEOs are celebrated as public benefactors and forward-thinking leaders, but it’s often hard to tell whether they are genuinely public spirited or just command an effective public relations campaign. All that makes a travesty of public service and public office and runs contrary to the public interest.

We should understand how we got to this failed state. That’s largely a story of the CEO’s rise to prominence with the financialization of the economy and of political reaction against broad public welfare schemes. The trend is toward privatizing the republic and hoarding the American future. We are confronted with “a philosophical position,” as historian Heather C. Richardson writes, “embraced by those who would overturn the active government that has presided over the United States since the New Deal.” In response to this attempted overthrow, we have to build a robust alternative, or at least do the work necessary to give future generations a head start on it.

The First CEO: A 1966 Illustration

An early illustration of the acronym “CEO” turns up in an influential book on corporate governance from 1966.

Back in 2012, I set out to track down the earliest illustrations of the acronym “CEO” (for Chief Executive Officer) and make some historical sense of the evidence I found. For the most part, I have been confining my searches to the American context, and looking at how the term “CEO” gains cultural currency even as real-world CEOs gain unprecedented power and social prestige in American life.

My initial search led me back to 1970 and the pages of the Harvard Business Review. Now I’ve uncovered an even earlier illustration, or, rather, a whole slew of earlier illustrations, in the pages of The Corporate Director, a book by Joseph M. Juran and J. Keith Louden published in 1966.

Juran was a highly influential figure, an industrial engineer turned management guru, mentor to Peter Drucker and W. Edwards Deming. He is remembered today primarily for his writings on quality. The lesser known Louden started out as an industrial engineer (like Juran), moved into the management ranks after the Second World War, and began writing about corporate governance and business leadership starting in the 1960s, with the publication of The Corporate Director.

Their recourse to the three letter “CEO” appears to have been mainly a matter of expedience: “‘chief executive officer,’” they write, “recurs so often in this book that we have chosen to use the shorthand designation ‘CEO’ instead.” (p. 10)

For these authors, the abbreviation CEO is not merely a title, indicative of “rank”: it designates a “role,” or “the broad function or job assigned to an individual.”

This book is primarily concerned with roles, duties, functions, deeds. Hence, as far as possible, it uses words in their sense of describing roles. To the same end, it avoids, as far as possible, the use of words which are mainly descriptive of rank without describing role; for example, “President,” “Officer.” Moreover, it uses the “role-describing” words in their uncapitalized form to emphasize the role rather than the title; for example, chief executive officer, chairman of the board. The abbreviation CEO (for chief executive officer) is capitalized only to prevent a three-letter word from escaping notice. (p. 77)

At the time, those performing the role of chief executive officer (or CEO) mostly had the title of “President.” Juran and Louden cite a 1962 study of 900 industrial companies, which found that the “role of CEO” was assigned to the President 70 percent of the time; the Chairman of the Board 25 percent of the time; and the Chairman of the Board and President 5 percent of the time.

With the libraries closed due to the coronavirus, I’ve only been able to find this 1962 study — a research report from the National Industrial Conference Board and the American Society of Corporate Secretaries by John R. Kinley, entitled Corporate Directorship Practices — on Google Books. No preview is available. A search for “CEO” here turns up 4 instances, but the results do not display the actual text. So there may be a 1962 illustration waiting to be found. Page 86 looks especially promising. (It’s worth adding, however, that the three letter cluster creates a lot of false positives, so I can’t know for certain until I see the actual page.)

Even so, I am uncertain that these earlier illustrations change the big picture. It still seems pretty clear that the 1970s — with the doctrine of shareholder value and the overall financialization of the economy — mark the beginning of the CEO’s American heyday. It’s possible the recent crises and the end of the post-2008 expansion will spell its gradual and inglorious end.

Posner is Right About Why Friedman is Wrong, But…

It’s worth reading Eric Posner on why Milton Friedman was wrong. My issue is with the historical setup to the argument.

The shareholder theory is usually credited to Milton Friedman, the University of Chicago economist and Nobel laureate. In a famous 1970 New York Times article, Friedman argued that because the CEO is an “employee” of the shareholders, he or she must act in their interest, which is to give them the highest return possible. Friedman pointed out that if a CEO acts otherwise—let’s say, donates corporate funds to an environmental cause or to an anti-poverty program—the CEO must get those funds from customers (through higher prices), workers (through lower wages), or shareholders (through lower returns). But then the CEO is just imposing a “tax” on other people, and using the funds for a social cause that he or she has no particular expertise in. It would be better to let customers, workers, or investors use that money to make their own charitable contributions if they wish to.

Friedman’s theory was wildly popular because it seemed to absolve corporations of difficult moral choices and to protect them from public criticism as long as they made profits. At the same time, it took CEOs down a peg—yes, they were resented even in 1970—by denying that they were visionaries with public responsibilities. And Wall Street saw dollar signs in the single-minded devotion to corporate profits.

Of course, Friedman never mentions “the CEO” in his 1970 article. Friedman uses “managers,” “businessmen,” and “corporate executives” to discuss the agents who enter into “voluntary contractual arrangement” with the corporation’s principals or owners: e.g., “the key point is that, in his capacity as a corporate executive, the manager is the agent of the individuals who own the corporation or establish the eleemosynary institution, and his primary responsibility is to them.” As I’ve observed in a number of posts, the acronym “CEO” would not come into wide use until about five years later, and then only in business journals. The general public would not start hearing about CEOs until the very late 1970s and early 1980s.

So while business executives might have been “resented even in 1970,” CEOs strictly speaking were not. If this is a quibble it’s a revealing one. It allows us to see the CEO historically, and as the creature of Friedman’s wildly popular doctrine.

Though they, too, may have been targets of public criticism and resentment, by the 1980s CEOs were also being made into celebrities and held up as models of American leadership. And as “the single-minded devotion to corporate profits” — and rapidly rising CEO pay — came to be celebrated as “visionary” in its own right by the fledgling business press, the words “visionary” and “vision” would come in for decades of abuse.

Arendt on Enlightened Self-Interest

From the essay “On Violence” in Crises of the Republic (1972):

Nothing, unfortunately, has so constantly been refuted by reality as the credo of “enlightened self-interest,” in its literal version as well as in its more sophisticated Marxian variant. Some experience plus a little reflection teach, on the contrary, that it goes against the very nature of self-interest to be enlightened. To take as an example from everyday life the current interest conflict between tenant and landlord: enlightened interest would focus on a building fit for human habitation, but this interest is quite different from, and in most cases opposed to, the landlord’s self-interest in high profit and the tenant’s in low rent. The common answer of an arbiter, supposedly the spokesman of “enlightenment,” namely, that in the long run the interest of the building is the true interest of both landlord and tenant, leaves out of account the time factor, which is of paramount importance for all concerned. Self-interest is interested in the self, and the self dies or moves out or sells the house; because of its changing condition, that self cannot reckon in terms of long-range interest, i.e., the interest of a world that survives its inhabitants…. Self-interest, when asked to yield to true interest — that is, the interest of the world as distinguished from the self — will always reply, Near is my shirt, but nearer is my skin. That may not be particularly reasonable, but it is quite realistic; it is the not very noble but adequate response to the time discrepancy between men’s private lives and the altogether different life expectancy of the public world. To expect people, who have not the slightest notion of what the res publica, the public thing, is, to behave nonviolently and argue rationally in matters of interest is neither realistic nor reasonable.

A Quibble Over Robert Reich’s “CEO” Statesman


J.D. Zellerbach

One of the posts on this blog with consistently high traffic is The First CEO, which was my first attempt to track down the earliest instances of the acronym “CEO.” With a little help from the people at Webster’s Dictionary and the Harvard Business Review, I found that those came in the 1970s. In subsequent posts on this theme, I tried to make some historical sense of the literary evidence I’d uncovered.

So I have a quibble with Robert Reich’s polemic in The American Prospect (and elsewhere; he’s syndicated), comparing the CEOs of today and their “shameful,” self-serving silence in the face of Trumpian authoritarianism to the “CEOs” of the 1950s:

I’m old enough to recall a time when CEOs were thought of as “corporate statesman” [sic] with duties to the nation. As one prominent executive told Time Magazine in the 1950s, Americans “regard business management as a stewardship,” acting “for the benefit of all the people.”

That prominent executive, held up here as a model corporate statesman, was pulp and paper executive J. D. Zellerbach. Zellberbach was not a CEO — he could not have been in the 1950s — but the President of Crown Zellerbach. Reich is using the term “CEO” loosely, then, but in this piece that seems to prevent him from thinking historically about the CEO as an institution.

Perhaps he should have instead asked whether the institution of the CEO in the 1970s represented a rejection of “socially-conscious” business leadership for which he’s calling.

Remarkably enough, in Saving Capitalism, Reich himself quotes Zellerbach’s statement to Time Magazine just before he discusses the shift from the benevolent managerialism advocated by industrialists like Zellerbach to “a radically different vision of corporate ownership” that set in during the 1970s (and brought with it, among other things, the institution of the CEO). It’s worth reading this passage to the bitter end:

In the early 1950s, Fortune magazine urged CEOs to become “industrial statesmen,” which in many respects they did—helping to pilot an economy generating broad-based prosperity. In November 1956, Time magazine noted that business leaders were willing to “judge their actions, not only from the standpoint of profit and loss” in their financial results “but of profit and loss to the community.” General Electric, noted the magazine, famously sought to serve the “balanced best interests” of all its stakeholders. Pulp and paper executive J. D. Zellerbach told Time that “the majority of Americans support private enterprise, not as a God-given right but as the best practical means of conducting business in a free society….They regard business management as a stewardship, and they expect it to operate the economy as a public trust for the benefit of all the people.”

But a radically different vision of corporate ownership erupted in the late 1970s and early 1980s. It came with corporate raiders who mounted hostile takeovers, wielding high-yield junk bonds to tempt shareholders to sell their shares. They used leveraged buyouts and undertook proxy fights against the industrial statesmen who, in their view, were depriving shareholders of the wealth that properly belonged to them. The raiders assumed that shareholders were the only legitimate owners of the corporation and that the only valid purpose of the corporation was to maximize shareholder returns.

This transformation did not happen by accident. It was a product of changes in the legal and institutional organization of corporations and of financial markets—changes that were promoted by corporate interests and Wall Street. In 1974, at the urging of pension funds, insurance companies, and the Street, Congress enacted the Employee Retirement Income Security Act. Before then, pension funds and insurance companies could only invest in high-grade corporate and government bonds—a fiduciary obligation under their contracts with beneficiaries of pensions and insurance policies. The 1974 act changed that, allowing pension funds and insurance companies to invest their portfolios in the stock market and thereby making a huge pool of capital available to Wall Street. In 1982, another large pool of capital became available when Congress gave savings and loan banks, the bedrocks of local home mortgage markets, permission to invest their deposits in a wide range of financial products, including junk bonds and other risky ventures promising high returns. The convenient fact that the government insured savings and loan deposits against losses made these investments all the more tempting (and ultimately cost taxpayers some $124 billion when many of the banks went bust). Meanwhile, the Reagan administration loosened other banking and financial regulations and simultaneously cut the enforcement staff at the Securities and Exchange Commission.

All this made it possible for corporate raiders to get the capital and the regulatory approvals necessary to mount unfriendly takeovers. During the whole of the 1970s there had been only 13 hostile takeovers of companies valued at $1 billion or more. During the 1980s, there were 150. Between 1979 and 1989, financial entrepreneurs mounted more than 2,000 leveraged buyouts, each over $250 million. (The party was temporarily halted only when raider Ivan Boesky agreed to be a government informer as part of his plea bargain on charges of insider trading and market manipulation. Boesky implicated Michael Milken and Milken’s junk bond powerhouse, Drexel Burnham Lambert, in a scheme to manipulate stock prices and defraud clients. Drexel pleaded guilty. Milken was indicted on ninety-eight counts, including insider trading and racketeering, and went to jail.)

Even where raids did not occur, CEOs nonetheless felt pressured to maximize shareholder returns for fear their firms might otherwise be targeted. Hence, they began to see their primary role as driving up share prices.

Varoufakis on Bankruptocracy

At an anti-austerity event at the Emmanuel Centre in London yesterday evening, former Greek Minister of Finance Yanis Varoufakis offered a few remarks on the period in which we are now living. Here is my transcript of the part of his talk describing the zombie state of “bankruptocracy” that arose after “capitalism died” in 2008.

When the bank of England prints billions and billions and billions to buy these paper assets — which are mortgages, which are private debts of the banks, which are public debts and so on and so forth —  what happens is two things.

Firstly, house prices increase, in the parts of the country where wealth is concentrated, the wealthy people spend more, their income increases, so there is this sensation among the ruling class that they’ve stabilized the economy because their bottom line has been stabilized.

At the very same time, you have a situation where companies have access to cheap money, courtesy of QE. The tragedy however is, what do they do with this money? Now they’re not dumb. They know that the rest of you cannot afford their goods and services, so they’re not going to invest in productive activity, in order to produce more of them. So what do they do?

They borrow the money that the QE program is producing, giving it to the banks; the banks pass it on to the corporations; and what do the corporates do? They buy back their own shares. They borrow money to buy back their own shares because that way, they push the share price up, and guess what the bonuses of the CEOs are connected to? The share price. So they have more income, and all this money creation, liquidity creation, does not find itself not only in the pockets of working men and women; but it doesn’t even find itself into productive investment into capital.

So we have a capitalism without capital. We have a capitalism with financial capital.

We don’t live in capitalism.

In 1991 socialism collapsed; and the socialist camp and the left worldwide suffered a major defeat, both a political and a moral defeat. And we’re culpable for that, but that’s another story.

In 2008, capitalism died. I describe the new system we live in as “bankruptocracy”: the rule by bankrupt banks that have the political power to effect a transfer — a constant tsunami of money coming from the financial sector and from working people into the bankrupt banks, which remain bankrupt even though they are profitable, because the black holes created during the years of Ponzi growth prior to 2008 remain.

You can watch the whole speech here, on Varoufakis’ site.

The First CEO: A Political Revolution?

I’ve been associating the cultural icon of the CEO with big changes in America, most of which were well underway in the 1970s, when the acronym “CEO” first comes into wide use: the collapse of manufacturing, the financialization of the economy, the emergence of the neoliberal order. David Graeber offers yet another way to characterize these changes: “total bureaucratization.”

An excerpt from Graeber’s new book in the latest issue of Harpers lands us in familiar territory:

What began to happen in the Seventies, which paved the way for what we see today, was a strategic turn, as the upper echelons of U.S. corporate bureaucracy moved away from workers and toward shareholders. There was a double movement: corporate management became more financialized and the financial sector became more corporatized, with investment banks and hedge funds largely replacing individual investors. As a result, the investor class and the executive class became almost indistinguishable. By the Nineties, lifetime employment, even for white-collar workers, had become a thing of the past. When corporations needed loyalty, they increasingly secured it by paying their employees in stock options.

What Graeber at first characterizes as “a strategic turn” and the merging of the corporate and financial sectors, he then goes on to call “a political revolution”:

At the same time, everyone was encouraged to look at the world through the eyes of an investor — which is one reason why, in the Eighties, newspapers continued laying off their labor reporters, while ordinary TV news reports began featuring stock-quote crawls at the bottom of the screen. By participating in personal-retirement and investment funds, the argument went, everyone would come to own a piece of capitalism. In reality, the magic circle only widened to include higher-paid professionals and corporate bureaucrats. Still, the perceived extension was extremely important. No political revolution (for that’s what this was) can succeed without allies, and bringing along the middle class — and, crucially, convincing them that they had a stake in finance-driven capitalism — was critical.

The parenthetical affirmation — “(for that’s what this was)” — asks us to pause and really take the point. Having read only this excerpt, I don’t know whether Graeber goes on to explain why what he elsewhere calls a “shift” or “turn” counts as a “political revolution,” or how exactly he thinks this overturning of the political order was brought about. No doubt there was fraud, collusion and conspiracy, and “everyone was encouraged” to believe they were included; but the passive verb here leaves way too much unsaid. For one thing, the triumph and establishment of  the new order at home and abroad was really not so bloodless as Graeber (here, at least) makes it out to be.

The celebration and glamorization of the CEO — as a leader, a rule-maker and a rule-breaker, the agent and steward of shareholder value — was one of the things that duped ordinary, middle-class Americans into thinking “they had a stake in finance-driven capitalism.” It deserves a chapter in the story Graeber’s out to tell. The acronym “CEO” itself belongs to what Graeber calls the “peculiar idiom” of “bureaucratic techniques” and meritocratic myths — a language with origins in self-actualization movements of the 1970s, “full of bright, empty terms like ‘vision,’ ‘quality,’ ‘stakeholder,’ ‘leadership,’ ‘excellence,’ ‘innovation,’ ‘strategic goals,’ and ‘best practices.’” It’s good to see this language held up for scrutiny, especially since, as Graeber rightly points out, it still “[engulfs] any meeting where any number of people gather to discuss the allocation of any kind of resources.” To the victors go the spoils, and that’s not likely to change as long as we are speaking their language and playing by their rules.

To the Edge of the Gap with Satya Nadella

It’s hard to believe that the people around Microsoft CEO Satya Nadella did not prepare him for a question about the pay gap at the Grace Hopper Celebration of Women in Computing conference, and even harder to believe that they would advise him to tell women to stop asking for a raise and place their “faith,” instead, in “karma.” Nadella must have gone off script, or lost his talking points on the way to Phoenix. He tried to backpedal on Twitter later in the day, but by then the damage was done.

There is a transcript of the mess here. Nadella starts by talking about the inefficiencies of “HR systems” and ends up endorsing a corporate caste system, in which karma determines station. He advises talented women that the arc of Microsoft universe is long, but bends toward justice: they should keep the faith, keep working and just keep quiet about the whole equal pay thing.

Today, he’s repented, in an email to Microsoft employees: “if you think you deserve a raise, just ask for it.” He’s also committed, he says, to closing the pay gap at Microsoft. The trouble is, telling women they should “just ask” for raises may indicate that the CEO has found a formula that will allow him to remove his foot from his mouth, but it isn’t going to solve the problem.

In fact, research by the organization Catalyst — which I’ve written about in another post — shows that while the system may reward men in roughly the way Nadella describes, giving them “the right raises as [they] go along,” it does not so reward women; and when women ask for raises, their requests go unmet. It’s hard to have faith in a system like that.

The whole incident brings me back, of course, to my ongoing interest in the power of asking, which is the power in question here.

“Just ask” sounds like permission; but permission does not necessarily entail power. What’s fascinating about the Catalyst research on what happens when women ask for raises is that it clearly shows that the power of asking is a power we have to confer on others: it’s the power we give the other to make claims (or demands) on us.

We confer that power when we recognize the other’s status as a second person, or — to put it another way — when we recognize in them an authority equal to our own.

Respect that authority, and we are mutually accountable to each other. Disrespect or disregard it, and we deny others the status of persons, make them instruments of our will or means to our ends. We dehumanize them, or fail to acknowledge them as fully human.

Of course, respect of this fundamental order is not something Nadella can institute at Microsoft by tweeting about “bias,” emailing his apologies or by executive fiat. But a good place to start the broader conversation about closing the pay gap (at Microsoft, in the tech industry or throughout the business world) might be to see it, and approach it and address it as a basic power gap that only true respect for persons can bridge.

A Fifth Note on the First CEO: The Postwar Fad

We don’t usually think of corporate boardrooms as places where fads start or take hold. But that’s probably the the best way to account for the adoption of the CEO title by American corporations in the postwar period. Or at least that’s the view urged in this 1999 paper by Allison and Potts, which a reader shared in a comment on my post about the postwar provenance of the term CEO: from the mid 1950s to the mid 1970s, the adoption of the Chief Executive Officer title spread, primarily through “board interlocks” — or through individuals serving on multiple corporate boards.

Allison and Potts present the title’s diffusion through corporate networks as a “no brainer,” “an innovation largely without consequence to adopters.” It was a case, they say, of “contact-only diffusion” or “diffusion with contagion,” in which no serious choices or business decisions had to be made; the title may have helped clarify the difference between President and Chairman, but for the companies Allison and Potts study there was no “non-trivial economic benefit or cost” involved. Companies adopted the title Chief Executive Officer largely because they were emulating other companies: “diffusion of the CEO title was strictly mimetic, a true fad.”

Everybody was doing it. Container Corporation of America started the trend in the late 1940s: why, Allison and Potts don’t explain, but I hope to make some sense of that at some point in the future; it’s intriguing, to say the least, that the company led by Walter Paepcke — Aspen booster, patron of the arts, and promoter of big ideas — led the way. In 1955, CCA was the only one of the largest 200 industrial companies in the United States that had a Chief Executive Officer. By 1975, all but one of the bunch had adopted the title.

CEO Titles

The fad takes hold in four stages: an early period, from 1955-1961;1962-1965, when adoption rates climb dramatically; a late middle period, from 66-71; and a final period where we see adoption rates drop off, mainly due to the remaining number of small adopters.

Though Allison and Potts don’t distinguish the adoption of the Chief Executive Officer title from the use of the acronym CEO, it’s in that late middle period, which they call the “inflection point” of the fad, where we start to see the first traces of the acronym “CEO” in the Harvard Business Review and other business publications. Shareholder value theory makes its debut in 1970. By the time the fad has run its course, in 1976, Jensen and Meckling have published their theory of the firm: the CEO has been identified as the primary “agent” of the firm’s success. He has also begun to enjoy unprecedented political influence, social prestige and cultural celebrity. What began as a boardroom fad has produced a new icon of American power.