NCPA - National Center for Policy Analysis

Best And The Brightest in the Private Sector

August 15, 2000

Companies in highly regulated industries, such as utilities, have well-educated managers and executives, but not the best. According to one study, regulated firms do not attract the same quantity or quality of top-educated personnel.

The study found that:

  • Firms with relatively little regulation had twice the number of top educated lawyers, over twice the number of top MBAs and three times the number of Ph.D.s, compared to heavily regulated firms.
  • Deregulating the airline industry doubled the number of chief executive officers (CEO) with a law degree from a top school and more than doubled the number of nonengineering CEOs from top schools.
  • Private industry firms have nearly three times the number of CEOs from a top school overall as compared to regulated industries.

The study suggests that since regulated industries have less profit potential, they cannot attract the best and the brightest. Conversely, industries with a large amount of competition have a large profit potential and attract the best CEOs to tap that potential.

Source: Darius Palia, "The Impact of Regulation on CEO Labor Markets," RAND Journal of Economics, Spring 2000.


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