Who wants to be a modern CEO?

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Not so long ago, the priorities for the boss of a publicly listed company seemed so much simpler: manage and expand the business effectively enough to earn a decent return for shareholders. This may be an overly rose-tinted view of the past. But such times are gone.

Consider the plates the modern chief executive must keep spinning. As well as dealing with geopolitical uncertainty, mounting government regulation, high inflation and interest rates, there is rising populism, cyber attacks and advances in artificial intelligence. Then there is managing reputation risk — including compliance with arduous governance codes — disclosure requirements and pledges on sustainability.

Hybrid working brings another set of pressures. And keeping staff motivated and loyal is a full-time job in itself — from rewarding and managing scarce talent to bridging the intergenerational divide and deciding when to engage publicly on contentious political and social issues. The pressure is constant to do and say the “right” thing.

CEOs need to handle all this while submitting to much greater scrutiny of their pay and conduct inside and outside the workplace, by employees, shareholders, the media and the public. Corporate leaders are expected to be “authentic” and vulnerable, but when mistakes are made the reckoning is swift. Bosses of businesses ranging from BP, the energy company, to NatWest bank have abruptly departed this year.

Boards of directors, meanwhile, are often ill-equipped to counsel on how to confront this plethora of challenges. Tensions between chairs and chief executives are rising; relationships between directors and executive teams are increasingly fraying. No surprise, perhaps, that rates of tenure among CEOs have declined sharply — from a median of six years among S&P 500 companies in 2013 to 4.8 years in 2022.

Who would want to be a chief executive today? There is, in fact, still a healthy supply of individuals striving to reach the top of publicly listed companies. Many may be strategic thinkers who are ambitious, visionary and natural leaders of thousands of people; being a raging narcissist helps in getting to the top. The escalating financial rewards are surely a draw, too. From 1978 to 2022, US CEO pay based on realised remuneration grew by 1,209 per cent, adjusting for inflation. This was well above the 932 per cent growth in the S&P 500 in the same period, and the 465 per cent rise in incomes in the top 0.1 per cent of earners. The median US worker’s annual remuneration rose by a puny 15.3 per cent.

The cult of the CEO that prevailed in the 1990s persists. But in today’s complex environment, boards would do better to create a more distributed structure at the top to spread risk and responsibilities. Companies should strive for a strong executive team with complementary skill sets. This can be particularly helpful if an unplanned succession has to take place. Staff may prefer it too.

In turn, boards need to be more effective advisers and overseers of a company’s risk profile — from stress testing and scenario planning to understanding how risks intertwine. They should better inform themselves, not just about how black swan events might hit the business model and strategy but also on structural shifts, from the energy transition to changing social norms. Outside advice may be a solution; consultants are at the ready, often charging hefty fees. Business leaders must be careful, though, not to outsource their thinking.

All of this is necessary not only to assist chief executives facing increasingly impossible jobs, but to guard against the over-mighty boss who might have a misguided faith in their own infallibility. But for those aspiring to these top roles, the message must be this: take the job at your own peril.