The composition of Fortune 100 executive teams: How diverse is the CEO succession pipeline at leading companies?
Seventy-eight percent of the CEOs of current Fortune 100 companies were promoted internally. In recent years at the largest companies around the world, that share has been rising. The fact that boards are increasingly seeing value in internally appointed CEOs means that a large number of future CEOs are already part of their company’s current leadership teams.
As boards continue to focus on diversity in terms of gender and race or ethnicity—among their many other requirements and preferences for CEOs—understanding how diverse today’s executive teams are offers a useful benchmark for how diverse the CEO role may be in five to 10 years.
CFO, COO, and head of division are by far the most frequent steppingstones to the CEO role; 66% of current Fortune 100 CEOs had one of these three as their previous position. There are 527 executives (35% of all executives) currently in these three roles; 20% are women, and 16% are people of color. This is progress from 2020, when 16% were women and 13% people of color.
As boards appoint more CEOs with less common areas of executive experience, they may tap into roles and functions with greater ranges of diversity. Among the new CEOs at the largest companies around the world, only 20% had C-suite experience other than CEO, CFO, or COO, similar to the 19% in 2021.1 But when boards do move beyond the most frequent steppingstones to find a CEO, they will also often give themselves more diverse options in terms of gender and race or ethnicity.
Looking forward
The low levels of gender and ethnic diversity in key internal pathways to the CEO role suggest that it will be challenging to increase diversity among Fortune 100 CEOs in the medium term. This is also true when it comes to board diversity, as our research found that these roles are also some of the most frequent executive backgrounds among people taking seats on Fortune 500 boards.
Companies give themselves the best chance at developing the most robust executive succession talent pools when they extend the strategic rigor of their CEO succession processes far deeper into the organization than most do today, treat executive development and succession planning as a core part of their overall talent retention strategy, and put in place tailored development programs to support the leaders they expect they will need today and in the future. Here are three questions to get started:
- Is your CEO and executive succession planning identifying potential leaders across all functions, and deep into the organization?
- Does your CEO and executive succession planning process consider multiple scenarios across a number of time horizons?
- Is your CEO and executive succession planning process complemented by a tailored leadership development, transition, and onboarding for each CEO and potential CEO?
Reference
1 Route to the Top 2022, Heidrick & Struggles, heidrick.com.