This is the published version of Forbes’ CEO newsletter, which offers the latest news for today’s and tomorrow’s business leaders and decision makers. Click here to get it delivered to your inbox every week.
Many of today’s executives spent years climbing the corporate ladder, preparing to ultimately take on a CEO position. But once they get there, how long do they stay?
A recent study from BusinessFinancing.co.uk found that U.S. CEOs tend to last 5.5 years, exactly at the midpoint of CEOs in other countries. Those in Azerbaijan have the shortest average tenure, at 2.8 years, while CEOs in Lebanon tend to stick around the longest: 8.5 years. Breaking it down by state, Mississippi has the longest-serving CEOs, who stay a median of 8.4 years, while Utah’s CEOs tend to last 3.9 years.
Six U.S. cities make the top 20 list of places where CEOs have the longest tenure: Laredo, Texas—with a median CEO tenure of 9.2 years, the second longest of any city in the world—Toledo, Ohio; Chula Vista, California; Edison, New Jersey; Baltimore, Maryland; and Hartford, Connecticut.
According to leadership recruiting firm Spencer Stuart, the average tenure of a CEO at a company on the S&P 500 in 2023 was 8.9 years, which represents a decline from 2021 and 2022. It shows the tailing off of a trend that started during the Covid-19 pandemic, in which CEOs and other executives tended to stay longer at their companies to help get through the disruption. And most of the CEOs who were new on the job in 2023—86%—came because their predecessors retired or voluntarily left the company. Spencer Stuart found that resignations under pressure grew in 2023, but still represented just one in 10 CEO changes.
The CEO’s job is undoubtedly a difficult one, though a steady business climate and economic growth have helped leaders want to stick around in these jobs. But as things get more stable, it could create space for change in the relationship between a CEO and a board, which might prefer new leadership to look at a company with a fresh perspective. Considering the many big changes that may be over the horizon with elections later in the year, it will be interesting to see where and how leadership shifts take place going forward.
A study this spring from Microsoft and LinkedIn found that 75% of full-time office workers are using AI in their jobs, but more than half of them don’t want their bosses to know because they fear it will make them look replaceable. I talked to David Steinberg, cofounder and CEO of AI-powered marketing tech company Zeta Global, about how executives can reassure their employees and institute an AI strategy to help the entire organization. An excerpt from our conversation is later in this newsletter.
ECONOMIC INDICATORS
The gold plated seal of the Board of Governors of the Federal Reserve System in Washington, DC.
Brooks Kraft/ Getty Images
Some good news on the inflation front: June’s rate was 3%, the lowest it’s been in a year. Economists had forecast last month would show 3.3% inflation, so the unexpected lower rate was a welcome surprise. Core inflation, excluding more volatile food and energy prices, was a bit higher at 3.3%.
And now the question on everyone’s mind: When will that translate to lower interest rates? Well over nine in 10 are expecting the Federal Reserve’s Open Markets Committee to cut rates at its September meeting, according to the CME FedWatch tool. The odds of a September rate cut had been increasing in the last week and a half, reaching 76% after Labor Department figures showed a 4.1% unemployment rate early this month. Lower inflation and a weaker job market, experts say, are more likely to show the Fed that rate cuts will provide an overall economic benefit.
STOCK MARKET NEWS
Traders on the floor of the New York Stock Exchange as the Nasdaq and S&P 500 were on a record swing up last week.
Spencer Platt/Getty Images
The stock market in the last week can be summed up with a quote from Charles Dickens’s A Tale of Two Cities: “It was the best of times, it was the worst of times.” Last week, the Nasdaq, S&P 500 and Dow Jones Industrial Average all hit record highs. And the Nasdaq and S&P 500 also saw their worst day in three months. Tech stocks, buoyed by reports that Apple anticipates selling 10% more iPhones at the end of the year, skyrocketed last Wednesday, then crash landed on Thursday, with the Nasdaq closing down 1.9% and the S&P 500 down 0.88%.
Why the dramatic rise and fall? Part of it has to do with the unexpected inflation report. The markets had been dominated by Big Tech’s “Magnificent Seven”—specifically companies with a presence in AI, including Apple, Nvidia, Microsoft, Google parent Alphabet, Facebook parent Meta and Amazon. (Electric car maker Tesla is the seventh of that group.) Optimism around new developments drove many of the tech stocks’ rallies. But as an interest rate cut started appearing more likely on Thursday, stocks for some companies in other sectors suddenly became more attractive to investors. Lower interest rates more directly would impact companies like Home Depot, which was one of the biggest movers on the Dow on Friday. And investors’ renewed interest in companies outside of the AI sector boosted the less-tech-dependent Dow to its new highs. Deutsche Bank strategist Jim Reid told Forbes the Magnificent Seven fell a collective 4.3% on Thursday.
The shifting of investors’ attention and dollars might actually be a good thing for the market as a whole, Forbes senior writer Derek Saul says. Looking at market cap, the big seven tech stocks were worth 33% of everything traded on the S&P at the end of Thursday. “The performance gap between tech and the rest of the market is so wide that it’s reasonable to expect continued closing of that gap as markets more fully embrace the idea of the start of a rate cutting cycle,” Sevens Report founder Tom Essaye told Forbes.
LEGAL ISSUES
getty
The Federal Trade Commission will sue three of the largest pharmacy benefit managers, accusing them of driving up the prices of vital medications, including insulin, and pushing customers away from less expensive alternatives. UnitedHealth Group’s OptumRx, Cigna Group’s Express Scripts and CVS Health’s Caremark manage roughly 80% of prescriptions in the U.S. The FTC has been investigating pharmacy benefit managers since June 2022, and has repeatedly warned of legal action if its inquiry found proof that they were blocking competitors, writes Forbes senior contributor Joshua Cohen. A report from the FTC asserted that pharmacy benefit managers exert substantial influence over pharmacies, and have control over the drugs that are available to patients, their price, and where they can be accessed. The lawsuit has not been officially filed yet, so it’s not clear how the legal battle may play out, but it could lead to major changes in the pharmaceutical business model.
TOMORROW’S TRENDS
Zeta Global’s David Steinberg On How To Create A ‘Safe Space’ For AI At Work
Zeta Global cofounder and CEO David Steinberg.
Zeta Global, Getty
A study this spring from Microsoft and LinkedIn found that about three quarters of employees are now using AI at work, but just over half are doing it in secret—mostly because they are afraid their bosses will think it means they are easily replaced. I talked to David Steinberg, cofounder and CEO of AI-powered marketing tech company Zeta Global, about what executives need to do to reassure their employees—and come together to use AI to help the company do better. This conversation has been edited for length, clarity and continuity.
The study seems to indicate that many employees are afraid they’d lose their jobs if their bosses knew they were using AI. Why aren’t more companies creating a “safe space” for employee experimentation?
Steinberg: I think most employers don’t think, ‘How do I empower my employees by using artificial intelligence?’ I think at a very high level, the board of directors is going to the CEO and saying, ‘What’s our AI strategy?’ And the CEO is going to the CMO, the CIO, the CTO, and saying, ‘What’s our AI strategy?’
To step back for one second, I believe that all technology—starting with the Gutenberg printing press, the telegraph, the telephone, the internet—go through three very distinct cycles. The first is hyper investment into infrastructure. Why is Nvidia winning? Why did Cisco win during the internet [boom]? Then it moves to efficiency of running your business, which is where we’re getting to. And then the third is how do we generate revenue? I think every technology of note from an enterprise perspective has sort of followed that exact same thing.
I think most CTOs, CIOs, they come at it think, ‘Okay, how do we cut 30% of our employees by using this and grow the business by 20%?’ It’s hard to do both of those things. Even if you’re thinking it, you don’t go communicate, ‘We’re going to eliminate 20% of our workforce using this.’ Employees get that vibe and the fear is there.
Whereas if you say, ‘Listen, our goal is to double the size of the company over the next three years,’ and say, ‘By the way, our goal is to keep every person we have, but not hire large numbers of new people to get real leverage in our business model,’ I think you create excitement around that.
How can a company really make employees believe that AI is coming in to improve productivity?
I have long said that the key metric you need to focus on from your employees is productivity. It’s not hours of the day. It’s not are you doing it yourself? I equate it to when I was a kid, you couldn’t bring an HP calculator to engineering classes. And now my kids bring their laptops to class. You’ve got to build an environment where people can use the tools that are available to them to make the most of their job.
I find that if you give people really interesting stuff to do and make them feel like they can win with the organization, they’re going to be excited about coming to work. At the end of the day, I think the companies have to show people that if they can be more productive by using these tools, they’re going to have upward mobility as an individual. Most individuals in organizations want upward mobility. And that doesn’t mean that everybody who comes into work every day thinks they’re going to be the CEO of the company.
Peoples’ basic requirements are they want to feel good about themselves, they want to feel good about their organizations, they want to feel like they’re being productive. They want to feel like they’re getting some level of adulation. This is just human nature. Treat people with respect, and they’ll generally treat you back with respect. If you create an environment at work where people feel they’re going to win with the organization by using these tools, and they can do more with less, you’ve got to show them they’re going to be rewarded for that, not punished.
How about at the executive level? How can this mindset be built into a company’s overall AI strategy?
I think that executives have to understand this is a paradigm shift. I think a lot of people are looking at AI, and you’ve got two schools of thought. You’ve got the school of thought that it’s going to change the world, and the school of thought that it’s total hype. They’re probably both wrong. Pendulums swing very hard, and the truth normally lies in the middle. There are components of AI that are going to change everything, and there are components of AI that are going to be worthless in two or three years.
If you look at organizations that adopted the telephone early, [or] adopted computers first, then the internet, ones that really adopted these technologies have thrived. Look at the dot-com crash. There was a lot of hype around it, a lot of capital put to it, but who emerged from it? Amazon, Facebook, Apple, Nvidia. These organizations came through the dot-com crisis. They took advantage of the crash. They hired the world’s greatest people. They had raised enough capital to get through it, and here they are: some of the world’s most valuable and successful companies.
But you can look at other companies: industrial companies, manufacturing companies, companies that are focused on other things that embrace technology. They’ve been the winners versus the companies that said, “Eh, we make this. We know how to manufacture it. We don’t need that next evolution of technology.” Most of those guys, now their counterparts in India and China are doing their jobs.
FACTS + COMMENTS
Former Slync.io CEO Chris Kirchner was sentenced to prison last week, following his conviction on charges of defrauding investors of tens of millions of dollars.
20 years: Length of Kirchner’s prison term. He was also sentenced to pay $65 million in restitution
$240 million: Top valuation of Slync, which made a logistics analytics platform backed by Goldman Sachs. The company shut down last October
‘Projecting personal prosperity was more important to him than making payroll’: U.S. Attorney Leigha Simonton said about Kirchner
STRATEGIES + ADVICE
Being an executive is stressful, and it’s easy to feel burnt out. Mental health therapy can help both your mindset and your business.
It’s summertime and CEOs need to take vacations, too. Here are ways to maximize your time off and get the mental rejuvenation you need.
VIDEO
QUIZ
Costco announced last week that it will soon raise its membership fees. When was the last time the cost of membership at the bulk retailer went up?
A. 2009
B. 2017
C. 2020
D. 2011
See if you got the answer right here.