After four decades, the cult of the chief executive officer is beginning to wane.

During this time, CEOs were the most influential decision makers in shaping both corporate and government decisions on a range of issues that restructured domestic society and the international economic order. These included support for international trade agreements; lowering of corporate tax rates; mergers and acquisitions; the transfer of manufacturing jobs to lower wage, non-union regions; stagnant wage rates for middle- and working-class employees; exploding salaries, bonuses and stock options for C-suite executives; and generous funding for more ideologically driven partisan politics.

Two recent books analyze the moral and economic consequences of this arc of power. The first, by New York Times business columnist David Gelles, deconstructs the values and legacy of Jack Welch during his 20-year tenure (1981-2001) as CEO of General Electric, "The Man Who Broke Capitalism" (2022). The other, written in 2021 by former Unilever CEO Paul Polman and sustainability analyst Andrew Winston, "Net Positive," offers a set of practical approaches for sustainable business leadership and is distilled, in part, from Polman’s 10-year run as CEO of Unilever (2009-2019).

Employees, customers, shareholders and citizens will need to galvanize new coalitions of political influence that transform the marketplace and reshape expectations of CEO leadership.

Together, these publications present contrasting bookends to the high stakes debate presently underway to define business success and the moral expectations for business leadership at a time of mounting global challenges.

Why has the CEO cult begun to decline?

The greater scrutiny and skepticism towards CEOs stem from the emergence of new evaluation criteria for CEO and corporate performance and a re-examination of the larger role of business in civil society. In both cases, bad examples of CEO leadership proliferate.

• Too many mediocre CEOs have populated the executive ranks. More than half of corporate mergers and acquisitions fail to achieve investor expectations due to poor due diligence and inadequate business strategy.
• Prominent examples abound of well-known CEOs caught up in ethical lapses or other personal failures documented by the #MeToo movement, and media and stakeholder scrutiny.
• A number of companies have been caught flat-footed by the changing business models of competitors or new market conditions. The market transformations resulting from the pandemic alone have transformed supply chains and specific business sectors such as airlines, hospitality and retailing.
• A growing number of problems that CEOs face are beyond the ability of their companies or the business community to resolve. Growing water scarcity that inhibits growth strategies, the global burden of plastic waste and the aspirations for greater societal equity all expose many CEOs' absence of understanding and the consequent lack of social legitimacy of decisions that are primarily aimed at satisfying traditional financial performance metrics.
• The continuing opposition of many CEOs and their trade associations and business coalitions to more aggressive climate change and other sustainability measures is greatly eroding their reputations. 

Cumulatively, these factors have reduced CEOs’ credibility and strategic degrees of freedom to manage their businesses. The result is greater public support for increased regulation and expanded investor interest in environmental, social and governance (ESG) initiatives that derisk business portfolios.

It is not surprising, therefore, that CEO tenure has declined. According to a 2018 PwC study of 2,500 public companies over the past 19 years, CEO turnover is at a record high with the median tenure at five years.

The CEO leadership and moral debate

No two individuals better exemplify the business leadership and moral debate of the modern CEO than Jack Welch and Paul Polman. While their tenures as CEOs did not overlap and they led companies in different business sectors, they both made critical decisions about business priorities and strategy, and the role of their companies in society at large. They personified largely contrasting visions of leadership and the moral rationale for business.

According to David Gelles, Welch abided by three major precepts during his leadership of GE:

• Downsizing. In Welch’s view, labor was a cost to the business that had to be minimized. Instead of regarding layoffs as a last resort, he aggressively downsized the workforce to improve short-term profitability. With other CEOs surfing the same fad, the result in the 1980s alone was the loss of 3 million jobs, or about one-third of all middle management positions.
• Dealmaking. Welch de-emphasized the accepted practices of research and development, in-house innovation and organic growth to generate profitability. Instead, he prioritized the pursuit of higher short-term margins through mergers and acquisitions. His example was hugely influential with other CEOs who, by 2019, transacted more than 18,000 deals with an aggregate value about $2 trillion.
• Financialization. Early in his tenure, Welch concluded that to achieve his aggressive growth goals, the manufacture and sales of GE products such as appliances, jet engines and plastics generated insufficient financial results. As an alternative to factories, he transformed GE to become a major player in finance. By his retirement in 2001, many of GE’s iconic manufacturing businesses had been sold or substantially reduced, and the financial services portfolio comprised 50 percent of the overall valuation and profitability of the company.

One major byproduct of this business model was to diminish the importance of environmental issues. Welch personally engaged in loud, adversarial and protracted debates with activist shareholders (including Catholic nuns) over dioxin contamination, he denied the existence of climate change and GE attorneys waged aggressive campaigns to reduce their legal exposure and costs for cleaning upon PCBs from the Housatonic and Hudson rivers.

Polman adopted a different set of strategies in executing Unilever’s business plans. As discussed in "Net Positive," they included:

• Institutionalize longer-term thinking in business planning. Almost immediately after assuming the CEO position, Polman decided to abolish reporting of quarterly earnings or provide financial guidance. This step was unique and controversial both then and now, and few other CEOs have followed this example. As a practical matter, it freed up significant amounts of executive time to manage Unilever’s businesses rather than conduct endless briefings for investors every quarter. More important, it sent a clear signal to all managers and employees that Unilever’s objectives and success were paramount across all time frames.
• Manage a broader set of business fundamentals. Unilever defined fundamentals beyond metrics such as price to also include reinvestments in its businesses, simplifying organizational complexity, improving governance, empowering employees and operationalizing vision through the integration of values and business strategy.
• Align business strategy and sustainability for a common purpose. The major goals of decoupling economic growth from environmental impacts, improving the lives of a billion people and scaling the growth of Unilever’s businesses all aimed to simultaneously advance customer solutions with solutions to societal problems. A major innovation opportunity was to position Unilever’s major brands as the platforms to deliver these improvements through transformation of research and development, manufacturing processes, supply chain relationships, external collaborations and supporting a fuller array of employee and societal needs

What’s next?

Stories about "heroic" CEOs that communicate leadership on climate change and a widening range of social and political issues populate media coverage. Such coverage obscures the fact that company lobbyists frequently advocate contrary positions to such lofty front office statements. Most CEOs also sheathe any sharp edges to their individual messages when they are within the peer culture of their trade associations by collectively opposing more aggressive actions to address climate change or even report on the financial risks of greenhouse gas emissions.

A recent study of S&P 1500 companies by professors from Boston College, Harvard and Washington University also concludes that C-suite executives, who historically identify as Republican voters, have become even more politically polarized than the general population.

Given these trends among incumbent CEOs and the continuing narrow focus of the business school curriculum that is preparing next-generation company leaders, we should not expect CEOs will be dislodged from their narrow focus on shareholder value or opposition to greater public accountability. For that to occur, employees, customers, shareholders and citizens will need to galvanize new coalitions of political influence that transform the marketplace and reshape expectations of CEO leadership. As for now, the late Jack Welch, who left office over 20 years ago, remains clearly in charge.