IMAGE: KEVIN DIETSCH VIA GETTY IMAGES
IN THE S&P 500, America’s main stockmarket index, the average chief executive is now 57 years old. That figure, compiled by Spencer Stuart, an executive-search firm, has barely budged for decades. Yet the average age at which a new boss takes the helm has been creeping down, from 52 in 2000 to just over 48 in 2023. A shift is under way in corner offices. The question is whether it is happening fast enough.
An emerging orthodoxy holds that youth is a competitive advantage in the corner office. The evidence for this view is now substantial enough to demand attention from boardrooms and investors. It comes from financial economics, behavioural science and the messy data of real corporate performance. And it suggests that the systematic exclusion of under-45s from CEO shortlists is a form of governance failure with painful costs.
Start with the numbers. Research by Matthew Serfling, now at the University of Tennessee, examined nearly 3,000 CEO-firm pairings over 16 years. Companies led by bosses younger than 55 generated total shareholder returns 4.2 percentage points higher each year than those run by older peers. In technology sectors, the gap stretched to more than seven points. Other studies have found similar effects. Firms with CEOs below 45 show higher R&D spending as a share of revenue, and their patents are cited 32% more frequently: a sign of consequential innovation rather than minor tinkering.
That is because younger executives tend to take more calculated risks. They make more acquisitions, hold less cash and invest more aggressively in new capabilities. Serfling’s work shows that older CEOs systematically reduce corporate risk-taking as their personal wealth becomes more concentrated in their employer’s stock. That is rational for them, but not always optimal for shareholders.
Another study, by Dirk Jenter of the London School of Economics and Katharina Lewellen of Dartmouth College, found that CEOs in their final years of tenure cut R&D and capital expenditure to boost short-term earnings—a pattern far less common among younger arrivals.
Sceptics will object that experience matters, especially in regulated industries or complex global firms. This is true but increasingly insufficient as a defence. The average large company today loses a third of its competitive advantage within five years of a technological shift, according to McKinsey, a consultancy. In the 1980s the figure was 15 years. Deep sector knowledge is less valuable when the sector itself is being reinvented. The chief executive who grew up with spreadsheets rather than cloud platforms may simply not grasp how quickly software can eat an industry.
The pandemic provided a natural experiment. Kim and Starks of the University of Texas found that firms with CEOs under 50 recovered to pre-pandemic revenues 2.6 quarters faster than those with older leaders. They attributed this to faster digitalisation of sales and swifter cost restructuring. Younger bosses were more likely to have grown up with remote tools and less invested in pre-pandemic ways of working. They adapted because they did not know what was supposed to be impossible.
None of this argues for handing the keys to the corner office to the youngest person in the room. Recklessness is real. Governance matters. The best outcomes in the data come from pairing a younger chief executive with an experienced chair or an advisory council of former bosses. Microsoft’s Satya Nadella, appointed at 46, had the counsel of Bill Gates and John Thompson in the boardroom. He also had the time horizon to place a billion-dollar bet on OpenAI, an AI startup, years before it paid off.
The most striking case for younger leadership may be the one that is hardest to quantify. The workforce is now majority millennial and Gen Z. These employees consistently report higher engagement and lower turnover intentions when led by someone they perceive as understanding their world. Gallup’s global workplace data shows an 11-point engagement gap between firms with under-50 and over-55 CEOs. That is not just a nice-to-have. In knowledge industries, where talent is the only asset that matters, it is a source of returns.
Boards are beginning to take note. The proportion of S&P 500 CEOs appointed below 45 has risen from 18% in 2000 to 31% today. Yet the average age of sitting CEOs remains stubbornly high because tenures have lengthened. The result is a leadership class that still looks much as it did a generation ago, even as the economy beneath it has transformed. The case for younger blood is not that youth guarantees success, but that the current bias against it guarantees something worse: a systematic failure to bet on the future. ■
