The Value of the MBA Degree

by John A. Byrne on

Is the glass half empty or half full?

That old cliché seems an apt description of a new report out today (Dec. 2) from BusinessWeek under the provocative headline “CEOs Don’t Need an MBA to Get Rich: New research shows that fewer than half of the highest-paid CEOs at big companies have MBA degrees.”

To come up with this conclusion, BusinessWeek asked a compensation consultant, Equilar, to take a look at the pay disclosures of companies with annual revenue of more than $1 billion and to compile a list of the highest-paid chief executives. Then, the firm looks at the resumes of the CEOs to see if they had MBA degrees.

The study found that more than half of the 50 highest-paid executives on the list lacked MBAs. BusinessWeek’s conclusion: “Do people need MBAs—particularly degrees from elite B-schools—to become successful chief executive officers with hefty paychecks? Exclusive new research suggests the answer is ‘no.’”

More Than Two-Thirds Of The 25 Highest-Paid CEOs Have MBAs.

But read more deeply into the story and you’ll find that this glass isn’t half empty at all. It turns out that Equilar discovered that more than two-thirds of the 25 highest-paid chief executives have MBA degrees, a finding which conclusively demonstrates the remarkable value of the degree. Even more fascinating is the fact that the list wasn’t dominated by the likes of Harvard or Stanford MBA chieftains.

In fact, a large number of schools can claim alums on the list. Some 18 of the highest paid executives got their degrees from schools that BusinessWeek ranks among the top 30, while seven more in a slightly larger group than 25 have MBAs from such institutions as Xavier University, Pace University, Mississippi State, and Bellarmine University.

Of the 21 CEOs out of the 25 highest paid, only three were from Harvard Business School. Columbia University’s B-school tied Harvard with three chieftains on the list. New York University’s Stern School had a pair of MBAs among the top 25. The rest came from such schools as Dartmouth’s Tuck School of Business, Virginia’s Darden School of Business, as well as the business schools at Indiana University, Michigan State, Case Western University, University of Pittsburgh, University of Minnesota, and the University of Texas at Austin.

Here’s the number of highest-paid MBAs from each school on BusinessWeek’s larger list:

Harvard: 3
Columbia: 3
Chicago: 1
Stanford: 2
Indiana: 1
Minnesota: 1
NYU: 2
Michigan State: 1
UCLA: 1
Dartmouth: 1
Virginia: 1
Texas: 1
Xavier: 1
Mississippi State: 1
Pace: 1
Bellarmine: 1
Pittsburgh: 1
Case Western: 1
Ohio State: 1

The Degree Itself Rather Than Where It Is Stamped Seems To Count.

What that list shows, in other words, the MBA degree itself—not the elite university that stamped the parchment—seemed to count for as much of the glass-half-full result. In years past, it was common to see only a handful of schools dominate such lists which far fewer MBAs in prominent places. If anything, the results are a very positive indication of the power of the degree, no matter what institution granted it.

Another crucial point: many of the executives on the list received their MBAs in the 1970s and 1980s, long before the explosion in popularity of the degree. In other words, there are a lot of MBAs in the corporate pipelines working their way through the system. There’s no doubt that in the future even a greater number of CEOs—no matter where they rank on any list—will have the degree in their toolkits.

Why? It’s not just because more people are getting MBAs today than did in the 1970s and 1980s. It’s because research shows conclusively that the degree is valued. The survey data gathered by the Graduate Management Admission Council shows that employers give much higher ratings to the following skills and abilities when comparing MBAs with other employees:

  • Strategy and Innovation 86%
  • Strategic and systems skills 85%
  • General business functions 82%
  • Learning, motivation, leadership 79%
  • Decision making processes 74%
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  • Arthur Dullsworthy

    Weird. Di Meglio writes: “A further factor to consider is that many executives on the highest-paid list received MBAs in the 1970s and 1980s, long before the degree became a near-certain ticket to instant riches—and long before brand-name schools such as the University of Pennsylvania’s Wharton School (Wharton Full-Time MBA Profile) and Northwestern’s Kellogg School of Management (Kellogg Full-Time MBA Profile) became synonymous with quality.”

    Just to amuse myself, I searched Google Books for mention of Wharton’s or Kellogg’s MBA programs in the years between 1960 and 1975. I came up with this snippet from American Banker: “With respect to the smart young M.B.A. from Harvard or Wharton, manufacturing firms came out on top and commercial banks on the bottom.”

    I’ll translate that for you: BW did not invent the world. Wharton (and probably Kellogg) was quite well regarded in the troglodytic era four decades ago. Back when manufacturing was preferable to commercial banking and i-banking, private equity, venture capital, and consulting were almost completely unheard of.

  • jon

    I agree that the MBA is a decent degree, but I had a cousin who nearly went bankrupt after completing her degree and was unable to get a job for 2 years after graduation. The article states that slightly more than half of MBA full time grads have job offers in March. What about the rest? The article omits the curious fact that many CEO’s do not have an MBA, or a college degree-most famously Bill Gates. I am loathe to spend a 100,000 to learn cookie cutter material that then “guarantees” me a high salary (in a perfect world of no layoffs) just so I can repay a $100,000 loan. I could probably do better investing that money in a high yield stock (AGNC-19%) What happens to an MBA grad who loses a job and cannot repay the loan? I’ve asked people why they get the degree, and they say, because my friends are. That shows me the degree is now saturating the business world. I am not going into debt for a 50/50 proposition and what may have been a deal, is now overkill and enriches the schools.

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