According to a November 2009 paper by professors at Harvard and MIT, the percentage of CEOs at large publicly-held corporations with military experience has dropped precipitously from 59% in 1980 to only 8% today. This is potentially a big problem for American business and the stock market because the report concludes:

Our analysis shows that service in the military affects executive decisions and corporate policies and outcomes. More precisely, we find that CEOs who serve in the military tend to invest less, have lower expenditures on research and development, and their firms seem to perform better in times of industry distress.

To the extent that growth of firms through excessive investment can be inefficient, our results provide suggestive evidence that the shift away from military service to business MBA programs can pose an important challenge to corporations.

As an MBA degree holder with no military experience, I find this study’s conclusion humbling.

A 2012 academic study concluded that military CEOs “are less likely to be involved in corporate fraudulent activity and perform better during industry downturns.” These virtuous attributes translate into better stock performance. A 2006 Korn/Ferry study found that over a three-year period ending September 30, 2005, 59 companies on the S&P 500 headed by CEOs with military experience provided an average annual return of 21.3% compared with only an 11% return from the S&P 500. In fact, companies led by these CEOs delivered higher average returns than the S&P 500 over one, three, five and ten-year horizons. Military CEOs also survive longer at the top, with an average tenure of 7.2 years, compared to 4.5 years for all S&P 500 CEOs.

What is the explanation for such corporate outperformance and longevity? According to Korn/Ferry Managing Director Joe Griesedieck:

There are clearly certain traits [ex-military] CEOs possess that drive their approaches to leadership, communication and, perhaps most importantly, the ability to translate company vision into tangible results.

Nearly all of the CEOs interviewed in the Korn/Ferry study preferred a military background to an MBA. For example, General Electric (NYSE: GE) CEO Jeffrey Immelt says that he admires the ability of military men to deal with ambiguity.

To find out more about these military traits, I decided to learn from the best by reading General H. Norman Schwarzkopf’s autobiography It doesn’t Take a Hero. Schwarzkopf was the victorious U.S. general during the 1991 Persian Gulf War that ousted Saddam Hussein’s Iraqi army from Kuwait. Read on to find out what I discovered about this great man. Presumably, Schwarzkopf’s military values are instilled in all military officers, including those who become CEOs.

It Doesn’t Take a Hero

General H. Norman Schwarzkopf was the personification of leadership. After reading his autobiography, it becomes clear that leadership is based on at least three things: (1) honesty and honor; (2) caring about the well-being of the people under you; and (3) respect of other cultures.

Military CEOs are Honest and Honorable

From the day he was a little boy, Schwarzkopf learned that honesty was the best policy. After discovering that Schwarzkopf played with matches, his “pop” told him: “No matter what happens, no matter how bad a situation is, no matter what you think the consequences will be if you tell the truth, an honorable man does not lie. A Schwarzkopf does not lie.” This value was further ingrained in him as he attended Valley Forge Military Academy. At Valley Forge, Schwarzkopf participated in a food fight in the school’s cafeteria. An upperclassman told the freshman class that, as a matter of honor, whomever was involved in the foodfight should turn himself in. Schwarzkopf was the only cadet to turn himself in. He was punished severely despite his honesty. Schwarzkopf feels that an honor system should reward honesty, not punish it:

Honor is fundamentally a code of conscience; any institution that wants to foster it should not use a person’s sense of honor against him, as Valley Forge did. We’d been wrong to throw pie, but the cadet regimental commander had shown even poorer judgment by escalating a relatively minor situation into a matter of personal honor.

Upon graduating from West Point, he explained what honor meant to him:

When I began as a plebe, Duty, Honor, Country was just a motto I’d heard from Pop. By the time I left, those values had become my fixed stars. Some officers spend all their time currying favor and worrying about the next promotion – a miserable way to live. But West Point saved me from that by instilling the ideal of service above self – to do my duty for my country regardless of what personal gain it brought, and even if it brought no gain at all.

Military CEOs Care About Customers and Employees

Even as a boy, Schwarzkopf cared about people, even his adversaries. This is somewhat surprising, given that his sisters were mean to him, calling him “stupid” all the time and his mother was an alcoholic who was constantly mean and insulting while under the influence. Perhaps he vowed never to treat others the way he himself had been treated. He relates that he was big for his age growing up and yet didn’t like to fight other kids, even kids who were insulting him based on his German surname, because “I was worried that I would hurt my adversary.” During his student years at West Point, he was a leader because he showed concern for cadets under him and didn’t simply boss them around. He discovered that cadets were more willing to obey if they respected their leader:

I’d noticed that when morale in a cadet company went bad, it was typically because the Company had divided into hostile cliques. So I set about dissolving the cliques I saw forming in my company. If I’d said, “I’m company commander and you’re gonna do what I tell you,” it would have driven the groups apart. Instead I cooked up ways to get all the upperclassmen involved in running the company with me. To be an effective leader, you have to have a manipulative streak – you have to figure out the people working for you and give each tasks that will take advantage of his strengths. Personally I found that I got much better results with plebes by teaching, setting a good example, and helping them along.

In Vietnam, he endeared himself to the South Vietnamese by insisting that an American helicopter transport the corpses of fallen Vietnamese soldiers. Schwarzkopf also insisted on sleeping in the same squalid conditions as his Vietnamese troops, rather than sleep in the air-conditioned American compounds that were available, and also criticized American soldiers who disparaged the Vietnamese by calling them “gooks.”

He also was willing to jeopardize his own life for his men. While in Vietnam, he left the safety of his compound and braved Viet Cong machine gun fire in order to help some of his men that had gotten lost in the jungle. On his second Vietnam tour, he saved the lives of some black American soldiers caught in a minefield. After the fact, a black soldier came up to him and said: “Colonel, we saw what you did for the brother out there. We’ll never forget that, and we’ll make sure that all the other brothers in the battalion know what you did.”

Military CEOs Respect Other Cultures and Viewpoints

He learned tolerance and respect from his mother, who always told him that “the people she held in respect were those who earned their position through hard work, rather than having it handed to them.” He also did not suffer from bigotry, because his mother told him: “You have to understand that you’re one of the luckiest people in the world. You were born white. You were born Protestant, and you were born American. That means you’ll be spared prejudices that a lot of other people have to put up with. But always remember: you had nothing to do with the fact that you were born that way. It gives you no right to look down on anybody who wasn’t. No matter what the other children say, you must never look down on anybody.” Her words stuck, because his best friends growing up were both Jewish, a boy named Uri in Geneva when he attended Ecolint and a boy named Michael Lieberman when he was in Tehran with his father.

His respect for other viewpoints was also instilled in him by his father. While in Iran, his father had insisted that he eat a sheep’s eyeball, because Iranians considered it a delicacy and offered it to Schwarzkopf after a hunt. Schwarzkopf was disgusted but ate it anyway. His dad praised him, saying: “They were paying you a great tribute, and if you hadn’t eaten the eye, you’d have insulted them. But instead you ate it, and by doing that you made a contribution to American-Iranian relations.” Schwarzkopf never forgot this lesson and internalized it. A short time later, he ate the heart of gazelle.

When on tour in Berlin, he acted as a liaison between American officers and Germans because he was good at understanding other cultures and making sure that Americans respected German ways:

If General Johnson wanted to take his fellow generals to dinner at a German restaurant, I’d set it up and sit right there at the table to make sure nobody’s order got lost in translation and that the bill was correct. Ever since my days in Tehran, I’d enjoyed dealing with foreigners, and I understood the need to adapt to them rather than force them to adapt to me.

During his first tour in Vietnam, Schwarzkopf swallowed a drink composed of Scotch and pig’s blood without hesitation:

My Vietnamese counterparts were surprised and pleased. They later told me that the engineer battalion commander had meant to embarrass the Americans present and that by my action I’d brought great credit to the airborne. Simply by drinking that toast of scotch and blood, I’d begun building ties that would prove vital in battle.

He also was disturbed at how the Vietnam War was being “Americanized.” Rather than help the South Vietnamese fight for themselves, Americans showed disdain for the Vietnamese and did the fighting itself. This probably hurt the war effort because it did nothing to motivate the Vietnamese troops:

The Americanization of the war disturbed me. We were suddenly going in the wrong direction with the South Vietnamese. It was their country, their battle: eventually they would have to sustain it. I thought we should give them the skills, the confidence, and the equipment they needed, and encourage them to fight. Yet while our official position was that we were sending forces to help South Vietnam fight, the truth was that more and more battles were being fought exclusively by Americans, rather than by United States and South Vietnamese units working together. We also tended to lose sight of the fact that we were in somebody else’s country [because we were] dropping shells onto people’s rice paddies, which left the peasants terrified and offended.

His cultural sensitivity continued into later life and came in very handy during the Gulf War. Saudi Arabia is one of the most intolerant societies on Earth and it took great skill to get Saudi leaders to accept American soldiers on their soil. Schwarzkopf succeeded in gaining Saudi acceptance through his cultural sensitivity:

What loomed largest for them was the cultural crisis triggered by the sudden flood of Americans into their kingdom. We’d done what we could to forestall problems before the troops arrived: we’d banned alcohol and sexy magazines, lectured the troops on cultural sensitivity, and distributed a primer called The Military Guide to Arab Culture.

Schwarzkopf also personally charmed his Saudi guests by staying up well past midnight to philosophize with them, even though the subject at hand could have been dispensed with within 15 minutes.

Examples of Military CEOs

I can’t guarantee that any of the companies listed below will outperform the S&P 500 going forward, but everything else being equal I will choose the company with the military CEO every time:

 

Company	CEO	Military Service
Ashland (NYSE: ASH)	James O’Brien	U.S. Army
Casey’s General Stores (NasdaqGS: CASY)	Robert Myers	U.S. Army
ConocoPhillips (NYSE: COP)	James Mulva	U.S. Navy
FedEx (NYSE: FDX)	Frederick Smith	U.S. Marines
General Motors (NYSE: GM)	Daniel Akerson	U.S. Navy
Johnson & Johnson (NYSE: JNJ)	Alex Gorsky	U.S. Army
Kinder Morgan (NYSE: KMI)	Richard Kinder	U.S Army
Lockheed Martin (NYSE: LMT)	Robert Stevens	U.S. Marines
MeadWestvaco (NYSE: MWV)	John Luke Jr.	U.S. Air Force
Pacific Gas & Electric (NYSE: PCG)	Anthony Earley Jr.	U.S. Navy
Procter & Gamble (NYSE: PG)	Robert McDonald	U.S. Army
Verizon Communications (NYSE: VZ)	Lowell McAdam	U.S. Navy
Viacom (NasdaqGS: VIAB)	Sumner Redstone	U.S. Army
Washington Post (NYSE: WPO)	Donald Graham	U.S. Army