Columbia Man. A 1902 poster for Columbia University, by John E. Sheridan (Source: Wikimedia Commons)
Ideas for Leaders #370

Do Ivy League or Elite Educated CEOs Outperform Others?

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Key Concept

When selecting a potential CEO for your organization, will having studied at an Ivy League school make a difference to the performance they bring? According to this Idea, yes but only under certain conditions. Read on to find out more about whether it is worth the effort to specifically seek out elite or Ivy League-educated individuals for CEO positions.

Idea Summary

The term ‘human capital’ encompasses the knowledge, skills and talents inherent in individuals. These skills represent an important source of productivity in an organization, and can be enhanced through training and education. But could an individual’s selection from a top educational institution constitute or signal that they will amount to a ‘better’ human capital resource for an organization in the long-run?

In a 2014 working paper, researchers from Alberta School of Business looked at graduates of Ivy League schools with stringent admissions policies, in order to examine when and where such human capital offers the greatest value. Specifically, Danny Miller, Xiaowei Xu and Vikas Mehrotra asked whether it is simply their prestigious degree that gets them into good jobs and brings them favourable attention from the press, or do they actually outperform other CEOs?

This is a relevant question to consider today as it is now widely suggested that job performance rather than educational advantage is responsible for promotion and success in a corporate environment; and also that selective schools have become less socially elitist and more meritocratic, thus favouring the effects of human versus social capital.

The researchers found that the Ivy League educated CEOs had led firms with higher market valuations and also had a greater ability to sustain that valuation than other CEOs in the group. The advantage was strongest for undergraduate rather than graduate programs. This may be because undergraduate programs at Ivy League schools select for general intelligence, analytical ability, social skills and past achievements — academic and non-academic alike. These are also the sort of skills that are most relevant to the demands of a CEO. Graduate programs, on the other hand, base selection for admission more on general cognitive intelligence (essentially IQ) and competency within a specialized field of knowledge. CEOs from elite schools did better in their early careers, when younger, and in small companies, where they were more able to apply CEO-relevant undergraduate program-related skills than in larger corporations.

Methodology: The researchers identified 444 magazine covers from Business Week, Fortune and Forbes, that celebrated positive stories about Ivy League CEOs. The covers ranged from 1970–2008, and were compared with a random sample of 50 covers also chosen from the journals, as well as CEOs from Fortune 500 firms. The Ivy League Schools these CEOs were associated were Harvard, Yale, Princeton, Columbia, Brown, Dartmouth, Pennsylvania and Cornell. 

Business Application

Based on Milller, Xu and Mehrotra’s findings, it seems that under specific conditions, Ivy League-selected CEOs can indeed be considered a valuable resource. These CEOs show superiority in three ways:

  1. They are significantly more likely to appear in a sample of CEOs who make it onto the cover of national business magazines, as did those in the sample used by the researchers.
  2. They outperform in market valuation accorded to their companies by investors.
  3. They sustain their post-cover valuations longer than other cover CEOs.

However, this does not suggest that firms should specifically seek out Ivy League-educated individuals for CEO positions, as their success seemed to be found under specific conditions only: the firms have to be small, the CEOs younger and holding undergraduate rather than postgraduate Ivy League degrees. 

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Authors

Institutions

Source

Idea conceived

  • February 2014

Idea posted

  • April 2014

DOI number

10.13007/370

Subject

Real Time Analytics