Aging at the Very Top

This paper documents that the age at which CEOs are appointed has risen sharply over the past several decades. Using newly assembled data covering a wide set of firms, we show that this increase is concentrated outside the largest listed firms and driven primarily by longer and more diverse external career paths prior to CEO appointment. These patterns are difficult to reconcile with explanations based on demographics, schooling, or tenure. We develop a matching model in which workers differ in ability and experience and firms contain hierarchies of positions. Holding the workforce fixed, a rise in the value of experience reallocates older workers toward top positions. Consistent with the data, the model also predicts a rising return to experience and older CEOs in larger firms. We then investigate why experience has become more valuable. Using variation in firms' access to elite strategy consultants, an alternative source of generalist skills, we find that rising industry uncertainty and complexity lead firms to appoint older and more broadly experienced CEOs when young consultants are scarce, and more so among small firms. On the supply side, managers who observe a former coworker become CEO change jobs more often, including moves to lower-ranked positions in other industries at lower pay, consistent with investing in generalist experience.