Lawyers Make Better CEOs Than MBAs
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Harvard Business Review: Do Lawyers Make Better CEOs Than MBAs?, by M. Todd Henderson (Chicago):
We were interested in how lawyer CEOs might influence firm decision making more broadly — and whether they differ from CEOs without a law degree. I collaborated with Irena Hutton, Danling Jiang, and Matt Pierson to compare the behavior of CEOs with law degrees with those who earned a bachelor’s degree, MBA, or other degree. We looked at about 3,500 CEOs, about 9% of whom have law degrees. They were associated with nearly 2,400 publicly traded firms in the S&P 1500 from 1992 to 2012.
The most obvious impact a lawyer CEO might be expected to have is on the amount of litigation their company is involved in. We looked at over 70,000 lawsuits filed against our sample of firms in federal courts during those 10 years. We focused on nine common types of corporate litigation: antitrust, employment civil rights, contract, environmental, intellectual property, labor, personal injury, product liability, and securities.
The result was clear: Firms run by CEOs with legal expertise were associated with much less corporate litigation. Compared with the average company, lawyer-run firms experienced 16% to 74% less litigation, depending on the litigation type. Employment civil rights, antitrust, and securities lawsuits were reduced the most, while contract saw the smallest (but still significant) reduction with a lawyer CEO. The results were economically meaningful, since the reduction was several fewer suits per year in some cases. …
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