The decline of the baronial CEO

Changes in corporate leadership are recasting the very idea of industry in US

They bestrode the business world, or at least the suburban corporate campus, like a colossus. Sitting behind burnished wooden desks, in glass-walled corner offices like the one Jeffrey R Immelt occupied at General Electric’s former headquarters here in Fairfield, Connecticut, a select group of American chief executives were once more akin to statesmen than businessmen.

GE moved out of this sprawling Skidmore, Owings & Merrill-designed emblem of 1970s corporate modernism in favour of smaller, humbler digs in downtown Boston last year. And last week, Mr. Immelt unexpectedly announced plans to retire after 16 years in the top job, amid a sagging stock price and pressure from activist investors.

General Electric is just the latest storied name in corporate America to show its leader the door. Ford’s chief executive, Mark Fields, had been in the job for less than three years when he was fired in late May. Two weeks earlier, Mario Longhi of US Steel abruptly stepped down.

With these departures, the American era of the baronial chief executive, sitting atop an industrial dominion with all the attendant privileges, is drawing to a close.

It is one consequence of a transformed economic landscape in which many of the mega-corporations that defined 20th-century commercial life are confronting a host of new business and technological challenges. These changes — in corporate leadership, on boards and across Wall Street — are recasting the very idea of industry in America.

“The CEO with a big office, a tenure of 10 or 20 years, in a suit and tie, is becoming a thing of the past,” said Vijay Govindarajan, who served as GE’s chief innovation consultant in 2008 and 2009 and now teaches at Dartmouth’s Tuck School of Business.

Mr. Immelt’s exit from GE is particularly telling, given the its reputation as a training ground for the future chief executives of other companies. He tried to change GE, yet couldn’t react quickly enough to the forces affecting companies like his.

These include the rising power of activist investors, who buy up stakes in companies and then demand changes. Activists are now hunting much bigger game, demanding double-digit annual earnings growth in a stagnant economy. Or else.

It is a reality only too familiar to John Mackey, the co-founder and chief executive of Whole Foods Market. On Friday, after pressure from activists — a group he had referred to in an interview days before as “greedy bastards” — Whole Foods was acquired by Amazon for $13.4 billion.

That deal also shows how the digital age has upended the competitive landscape, pitting companies in vastly different industries against one another.
 

“Who ever thought Ford would be competing with Google?” said Michael Useem, a professor of management at the Wharton School of the University of Pennsylvania who has studied corporate leadership for decades. “But they are, and Mark Fields wasn’t moving fast enough.”

Boards, too, have changed, evolving from country-club-like collections of the same familiar faces into a much more diverse and demanding constituency.
 

To be sure, the money is better than ever. And pockets of unbridled ambition and occasional excess remain, especially in Silicon Valley, where Apple’s new $5 billion spaceshiplike headquarters opened in April.