President Eisenhower signing of HR7786, June 1, 1954, this ceremony changed Armistice Day to Veterans Day (Source: Wikimedia Commons)
Ideas for Leaders #337

Do Soldiers Make Good CEOs?

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Key Concept

CEOs with past military experience are more likely to pursue more conservative corporate policies (particularly those related to finance and investment), are less likely to be involved in fraud, and are in a better position to guide a company during crises or industry downturns, according to new research based on 25 years of corporate data.

Idea Summary

Do soldiers make better CEOs? There is no doubt that the hands-on leadership lessons learned in combat — or in preparation for combat — can seldom be matched by any corresponding leadership learning from business school or a typical corporate environment. Given the stress of war or training for war, ex-military business leaders may be particularly adept at making decisions under pressure. The military emphasis on duty and self-sacrifice may also make ex-military leaders less likely to become engaged in fraud.

Efraim Benmelech of Northwestern University’s Kellogg School of Management and Carola Frydman of Boston University investigated the correlations between military experience and CEO performance. For their research, Benmelech and Frydman analysed: biographical data (including education as well as military information) on the CEOs of 1500 publicly trade firms for each of 25 years; financial results and other performance metrics for those firms; and data on fraud cases involving the same set of firms.

Their analysis found that firms run by military CEOs were in general more conservative in their financial decisions: these firms invested less, spent less on R&D, and pursued slightly lower leverage ratios. However, the researchers found less of a difference between military- and non-military led firms on other metrics of financial policies, such as dividend payments. Still, the evidence suggested that military experience leads to more conservative financial and investment policies.

Benmelech and Frydman’s research concerning ethical behaviour was more conclusive; military service was connected to a 70% reduction in the likelihood of fraud compared to the average. Another of their studies demonstrated the link between lack of fraudulent behaviour and military service, while not showing a similar link between ethical behaviour and business school background.

Finally, using as their metric market-to-book ratios (the market value of a company versus the value based strictly on accounting), the researchers found that CEOs with military experience performed better during industry crises.

The researchers caution that companies may select CEOs with military experience based on their desire to have someone they think can deal with the stress of an industry downturn or even avoid fraudulent activity within their ranks. In other words, military experience may not automatically cause some of the effects described above — but the association between military CEOs and more resilience under stress, for example, is still there. 

Business Application

The research indicates that CEOs with military experience can, through their decisions, preferences and personal traits, reinforce certain strategies — for example, conservative investment policies — or respond more effectively to adverse market conditions. Ex-military CEOs can also have an impact if fraud is a concern.

The challenge, according to Benmelech and Frydman, is that in the past 25 years, there has been a steady decline in corporate America of CEOs with military backgrounds. In 1980, (the first year covered by the data) nearly 60% of CEOs of large publicly traded U.S. companies had served in the military. Today, only 6.2% of CEOs have a military background. Such numbers are probably replicated in many developed countries.

The pool is small, but companies can start to plan for the future by hiring young retired military officers today who might become the C-suite leaders of tomorrow. Companies such as Walmart and General Electric are already taking such steps and have launched initiatives to recruit junior military officers who served in Iraq and Afghanistan.

While the numbers of ex-military managers and leaders in the latest generations will never match what Americans call “the greatest generation,” there are many ambitious, young people who have served their country and are looking for opportunities to serve the right corporation. These young people — whose military experience, the research shows, cannot be replicated through any other source — may one day make the difference between the firm that successfully navigates through a time of crisis and the firm that succumbs.

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Idea conceived

  • February 2014

Idea posted

  • March 2014

DOI number



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