Economics: Good Choice of Major for Future CEOs
By Patricia M. Flynn and Michael A. Quinn* Abstract It is often suggested that Economics is a good major for individuals interested in becoming business leaders. Despite this widespread assertion, little research has been conducted on this topic. Using the Standard and Poor (S&P) 500 companies, this paper examines the validity of such a claim. We find evidence that Economics is a good choice of major for those aspiring to become a CEO. Economics ranked third with 9% of the CEOs of the S&P 500 companies in 2004 being undergraduate Economics majors, behind Business Administration and Engineering majors, each of which accounted for 20% of the CEOs. When adjusting for size of the pool of graduates, those with undergraduate degrees in Economics are shown to have had a greater likelihood of becoming an S&P 500 CEO than any other major. That is, the share of graduates who were Economics majors who were CEOs in 2004 was greater than that for any other major, including Business Administration and Engineering. The findings also show that a higher percentage of CEOs who were Economics majors subsequently completed a graduate degree – often an MBA -- than did their counterparts with Business Administration and Engineering degrees. The paper demonstrates that while women now comprise over half of all bachelors and masters degrees awarded, they remain a minority in terms of undergraduate degrees awarded in Economics and in MBA degrees conferred. Economics programs may try to appeal to more women students as a stepping stone to becoming a CEO, especially as women continue to account for less than 2 percent of the S&P 500 CEOs. Keywords: undergraduate major, CEO, economics degrees, gender mix of students JEL: A2 I. Introduction In discussing whether to major in economics as an undergraduate, the Princeton Review writes that “a thorough working knowledge of how Economics shapes businesses is necessary if you’re going to become a CEO one day” (Princeton Review 2006). This sentiment is echoed by numerous Economics Department faculty and websites. Common reasons given for the desirability of Economics in this regard are analytical and problem solving skills, knowledge of markets and the “big picture” perspective.
Patricia M. Flynn, PhD., Departments of Economics and Management, Bentley College, Waltham, MA, firstname.lastname@example.org. Michael A. Quinn, PhD., Department of Economics, Bentley College, email@example.com, 781-891-2938.
In spite of these claims, and an extensive literature on trends in Economics majors, there has been little analysis on Economics being a good choice for achieving high-level business leadership positions. This paper helps fill this gap by analyzing the educational backgrounds of the CEOs of the S&P 500 companies in 2004, and by assessing the likelihood of Economics majors becoming CEOs, relative to other bachelor degree recipients. While research is often hindered by the lack of a comprehensive data series on starting salaries and lifetime earnings, Economics majors have been shown to fare relatively well in several areas. Craft and Baker (2003), for example, found that lawyers with an undergraduate degree in Economics earn more than lawyers with other majors, ceteris paribus. Nieswiadomy (1998) shows that Economics majors rank first among the 14 most common majors taking the LSAT, and third among all majors taking the test. Black, Sanders & Taylor (2003) demonstrate that Economics majors earn more advanced degrees in business and in law than other majors. And among baccalaureate degree holders who do not earn a graduate degree, Black, Sanders and Taylor (2003) show that Economics majors generally earn more than their counterparts with other majors. In their study of CEOs, Boone and Kurtz (2001) note that business was the most popular undergraduate degree, but that Engineering, Economics and Humanities were also popular majors.1 In this paper we use CEO data for...
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