Keep Your CEO Out Of Grad School

NEW YORK - Think formal education helps in business? Think again. Chief executives who went to graduate school don't seem to make any more money for their shareholders than those with no advanced degree. M.B.A.s may actually do worse than those with no advanced degree, although they fare better than lawyers. 

Ignorance Pays
Type Of Degree	Number Of CEOs*	Median Total Return
No Advanced Degree	163	16.0%
Doctorate	24	15.5
Master's Degree	37	15.3
M.B.A.	165	15.2
Law Degree	51	13.9
*Includes Forbes 500s CEOs for whom all data is available. Only degrees with 20 or more CEOs are counted. Median total return to shareholders is annualized over the CEOs' tenure. Source: FT Interactive via FactSet Research Systems

Formal education does count for something. M.B.A.s turn up as chief executives more often than people with no advanced degree at all, and 50% more often than executives with law degrees, master's degrees and doctorates combined. Harvard M.B.A.s have a particular knack for becoming chief executives: 38 of them are CEOs of some of America's biggest companies. Unfortunately, that doesn't seem to help their shareholders much. 

Of the 440 CEOs on this year's Forbes 500s list of America's top companies for whom complete data was available, 38% have a master's of business administration degree. But the M.B.A.s did slightly worse than those with other types of master's degrees or doctorates. The 163 CEOs who had no advanced degree outperformed those who did. 

Harvard Should Be Crimson
Business School	Number Of CEOs*	Median Total Return
University of Chicago	5	24.0%
University of Pennsylvania	7	22.9
Stanford University	11	20.6
Northwestern University	8	20.0
Harvard University	38	10.6
Columbia University	11	3.5
*Includes Forbes 500s CEOs for whom all data is available. Table includes schools that produced five or more CEOs. Median total return to shareholders is annualized over the CEOs' tenure. Source: FT Interactive via FactSet Research Systems

We knew that CEOs such as Dane Miller, the engineering Ph.D. who heads orthopedic products company Biomet (nyse: BMET - news -people ), Arthur Levinson of Genentech (nyse: DNA - news - people ) and Irwin Jacobs of Qualcomm (nasdaq: QCOM - news - people ) did well in fields in which they have considerable expertise. But who would have thought that Harvard M.B.A.s--who are nearly twice as numerous as those with doctorates at the top spots of America's largest companies--would have been bested by the eggheads? 

Based on this data, it would appear that business schools might be doing a disservice to companies that hire their graduates. A Harvard M.B.A. may make it easier for someone to win a CEO slot, but it is not clear that it will make him a good chief executive. In contrast, executives with no advanced degree must work their way up through a hierarchy that is red in tooth and claw. This Darwinian process probably does better at weeding out good CEOs from bad than any M.B.A. program ever could. 


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