The Decline of the Baronial CEO

They bestrode the business world, or at least the suburban corporate campus, like a colossus.  Sitting behind burnished wooden desks, in glass-walled corner offices like the one Jeffrey R. Immelt occupied at General Electric’s former headquarters here, a select group of American chief executives were once more akin to statesmen than businessmen.

G.E. moved out of this sprawling Skidmore, Owings & Merrill-designed emblem of 1970s corporate modernism in favor of smaller, humbler digs in downtown Boston last year. And last week, Mr. Immelt unexpectedly announced plans to retire after 16 years in the top job, amid a sagging stock price and pressure from activist investors.

General Electric is just the latest storied name in corporate America to show its leader the door. Ford’s chief executive, Mark Fields, had been in the job for less than three years when he was fired in late May. Two weeks earlier, Mario Longhi of U.S. Steel abruptly stepped down.

With these departures, the American era of the baronial chief executive, sitting atop an industrial dominion with all the attendant privileges, is drawing to a close.

It is one consequence of a transformed economic landscape in which many of the mega-corporations that defined 20th-century commercial life are confronting a host of new business and technological challenges. These changes — in corporate leadership, on boards and across Wall Street — are recasting the very idea of industry in America.

baronial ceo

“The C.E.O. with a big office, a tenure of 10 or 20 years, in a suit and tie, is becoming a thing of the past,” said Vijay Govindarajan, who served as G.E.’s chief innovation consultant in 2008 and 2009 and now teaches at Dartmouth’s Tuck School of Business.

Mr. Immelt’s exit from G.E. is particularly telling, given the company’s reputation as a training ground for the future chief executives of other companies. He tried to change G.E., yet couldn’t react quickly enough to the forces affecting companies like his.

These include the rising power of activist investors, who buy up stakes in companies and then demand changes. Activists are now hunting much bigger game, demanding double-digit annual earnings growth in a stagnant economy. Or else.

It is a reality only too familiar to John Mackey, the co-founder and chief executive of Whole Foods Market. On Friday, after pressure from activists — a group he had referred to in an interview days before as “greedy bastards” — Whole Foods was acquired by Amazon for $13.4 billion.

That deal also shows how the digital age has upended the competitive landscape, pitting companies in vastly different industries against one another.

“Who ever thought Ford would be competing with Google?” said Michael Useem, a professor of management at the Wharton School of the University of Pennsylvania who has studied corporate leadership for decades. “But they are, and Mark Fields wasn’t moving fast enough.”

Boards, too, have changed, evolving from country-club-like collections of the same familiar faces into a much more diverse and demanding constituency.

To be sure, the money is better than ever. And pockets of unbridled ambition and occasional excess remain, especially in Silicon Valley, where Apple’s new $5 billion spaceshiplike headquarters opened in April.

But for most of the Fortune 500, the unquestioned power and perks, the imperviousness to criticism from the likes of shareholders, and the outsize public profile that once automatically came with the corner office have gone the way of the typewriter and the Dictaphone.

“These people were bigger than life, and I saw it up close,” said Kevin Sharer, a former chief executive of Amgen who worked as a top aide to Mr. Immelt’s legendary predecessor at G.E., Jack Welch. “They were a combination of chief executive, statesman and rock star. They were unassailable.”

A Naval Academy graduate, then an officer, before joining G.E. in 1984, Mr. Sharer said the only place that evoked a feeling of power comparable to the long hallways and corner offices of Fairfield in its prime was aboard the fast attack nuclear submarines where he once served as chief engineer.

“We had the confidence, the swagger, and we felt like we had unlimited industrial potential,” he said. “Could we buy RCA or NBC? Of course we could. I’m not complaining, but this is absolutely not the case today.”

That confidence extended well beyond the boardroom or the executive suite, providing a high profile not only in local communities, but in national affairs as well. Immediately after President Trump declared that the United States was pulling out of the Paris accord on global warming this month, Mr. Immelt offered a blunt dissent on Twitter.

“Disappointed with today’s decision on the Paris Agreement,” he wrote. “Climate change is real. Industry must now lead and not depend on government.”

As Amgen’s chief executive in the spring of 2009, Mr. Sharer visited the White House repeatedly to meet with Obama administration officials as they designed what would become the Affordable Care Act. He also played a key role in getting fellow pharmaceutical industry chiefs to support the legislation.

Now retired and teaching at Harvard Business School, Mr. Sharer said he would never do that today, as wading into bitterly partisan public debates offers little upside for corporate leaders, and risks damage to their company’s reputation.

As a result, while companies in many ways have more economic and political power than ever, “chief executives now shy away from weighing in on the policy level or broader societal issues,” Mr. Sharer said. “They’re more focused on running their companies.”

There are exceptions. Besides Mr. Immelt’s outspokenness on the climate issue, last year Kenneth C. Frazier of Merck called out “bad actors” in the pharmaceutical industry for exorbitant price increases. Timothy D. Cook of Apple challenged Mr. Trump’s proposed immigration restrictions in January.

Still, Mr. Immelt’s exit leaves a void at the intersection of business and public policy, along with the retirement this year of Douglas R. Oberhelman, the Caterpillar chief who led both the Business Roundtable and the National Association of Manufacturers.

“If you start fooling around in Washington with the Business Roundtable or writing op-eds, activist investors will ask what you’re doing,” Mr. Useem said.

G.E.’s next chief executive, John Flannery, is highly regarded inside and outside the company, said Bill George, a professor at Harvard Business School who served as chief executive of Medtronic. Mr. George is much more optimistic than Mr. Sharer on whether chief executives will continue to speak out on broader issues, but he doesn’t expect Mr. Flannery to emulate his predecessor’s high profile.

“I don’t see him stepping into that role,” Mr. George said. “He’s going to keep his head down and focus on the numbers.”

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