How the CEO Became an “Entrepreneur”
and Why It Matters to the Rest of the Organisation
Introduction
Walk into any airport bookshop, and you will find a shelf of business memoirs whose titles, taken together, describe a particular self-image: the visionary, the disruptor, the founder, the risk-taker, or the leader. These books are written by, or about, chief executives of large public companies. Most of those executives did not start the companies they run. Most have not personally underwritten the firm’s debts, mortgaged their houses to make payroll, or borne the financial uncertainty that is conventionally the defining experience of running one’s own business. They are, by the older language of corporate life, professional managers — hired stewards of going concerns built by others. Yet the word that attaches to them, in the press releases, the proxy statements, the analyst briefings, and the airport memoirs, is “entrepreneur.”
This is not a simple linguistic preference. The reclassification of the corporate CEO as an entrepreneur has had a significant impact over the past four decades. It has reshaped how executive performance is described, how executive compensation is justified, and — most consequentially — how the relationship between the executive and the firm is understood. For mid-level managers, the consequences show up in compensation gaps, in restructuring decisions, and in arguments about why employees should still invest effort in firms that visibly do not reciprocate. This question alone has a clear impact on the achievement of strategic objectives, commitment to organisational culture, employee satisfaction and change processes in the organisation.
This reclassification can be analysed along various dimensions: a semantic shift, in which the word “entrepreneur” was expanded to include a different economic role, a structural shift, in which the actual risk profile of the modern CEO became systematically one-sided. At the same time, the rhetoric of risk-bearing intensified and included an ideological shift, in which the executive was repositioned as an owner of corporate value rather than as a trustee of an institution. The three are related but distinct, and each carries practical implications for how organisations are run.
1. The semantic shift: a word doing different work
In economic thought, the word “entrepreneur” had a relatively precise meaning before the 1980s. Originally, an entrepreneur was seen as the person who introduces a new product, process, or business model to the market, starts a firm to implement it, and personally bears the financial and reputational risk of doing so. The venture’s profit was seen as the residual reward for effort and risk. In essence, the entrepreneur was seen as a founder, and what made the role distinctive was the personal exposure to outcomes that could not be known in advance.
By that definition, the chief executive of a large public company is, in nearly every case, not an entrepreneur. The CEO did not start the firm. The firm pre-existed their appointment, often by decades or generations. Their personal finances – other than salaries and benefits – are not committed to the firm’s success. If the firm fails, they leave — usually with a severance package — and the failure is borne by employees, suppliers, shareholders, and communities, not by them. To call such a figure an “entrepreneur” is to use the word in a different sense than the one in which it was originally minted. While the original entrepreneur risked losing everything, there are many examples of CEOs leaving bankrupt companies with large separation packages, only to be appointed as CEO at another organisation.
The semantic shift happened gradually, accelerating through the 1980s and 1990s. By the time Jack Welch was being celebrated by Fortune as the “manager of the century” in 1999, the magazine — and the broader business press — was already comfortable describing his career in entrepreneurial terms. The fact that Welch had been an internal hire who spent his entire career at General Electric, and who ran a company founded by Thomas Edison nearly a century before, did not noticeably trouble the framing.
For a mid-level manager, the semantic shift matters because it changes the standard of comparison. When the CEO is described as an entrepreneur, the implicit comparison is to a founder building something from nothing, and the compensation, autonomy, and deference owed to such a figure can be argued for. When the CEO is described as what they usually actually are — a senior steward of an institution they did not create — the standard of comparison is to other professional managers, and the case for extreme compensation becomes much harder to make. The semantic shift, in short, is having a real argumentative impact.
2. The structural shift: risk without immediate personal impact
The shift in language has been accompanied by, and used to justify, a transformation in how senior executives are paid.
An influential article in the Journal of Political Economy argued that executives should be paid much more in stock options, so that their interests would align with those of shareholders. Over the following two decades, option grants and equity awards came to dominate executive compensation.[i]
In the mid-1900s, the CEO’s salary was usually compared to the lowest-paid employee in the organisation. More recently, the salary – often excluding benefits – is compared to the median employee salary. This is a small but impactful change, specifically when considering executive pay against a minimum wage.
The case made for pay increases rested on the claim that executives were now exposed to genuine market risk — that they had, in the colloquial phrase, “skin in the game.” On paper, this is true. In practice, the architecture of executive compensation systematically muffles or insulates the executive from the downside that genuine risk would imply. The 2004 book Pay without Performance: The Unfulfilled Promise of Executive Compensation indicates that, on close inspection, the rhetoric of pay-for-performance often dissolves into pay irrespective of performance..[ii]
The “entrepreneurial risk” compensation committees appeal to is rhetoric. The protective architecture is structural, and the two work together to legitimise compensation gaps that, on any defensible measure of risk-adjusted performance, would be difficult to justify. One reason often put forward for the level of pay is the scarcity of executive skills. Historically, this risk was addressed through internal development and succession management programmes.
3. The ideological shift: from steward to owner
The deepest of the three shifts is the ideological one. Here, the question is not what executives are called, or how they are paid, but how they are entitled to behave and, just as importantly, how they understand themselves.
Earlier traditions of corporate management treated the senior executive as a trustee. The firm was an institution with multiple constituencies — employees, customers, suppliers, the community, shareholders — and the executive’s job was to balance their interests over the long term, preserving and extending the institution’s capacity. CEOs were fiduciaries for institutions that pre-existed them and that would outlast them. Their decisions were to be measured against the institution’s enduring interests, not against any particular quarter’s stock movement.
The reframing of the CEO as entrepreneur quietly dissolved this trustee role. An entrepreneur, by definition, is not the steward of an institution they inherited, they are the owner of a venture they created. If the CEO is to be understood as an entrepreneur, then by the same logic the firm is to be understood as their venture, and their primary obligation is to maximise the value of their stake. The other constituencies become inputs or constraints, not parties to whom they owe a fiduciary duty.
This shift in self-understanding is not academic. It licenses, in concrete operational terms, a particular style of decision-making. It permits large-scale layoffs presented as “creative destruction” rather than as the breaking of an institutional commitment. It justifies the financial engineering, share buybacks, and earnings management that characterise the contemporary public company, since these are the actions of an owner maximising their stake rather than of a steward preserving an institution. It naturalises the executive’s increasingly transactional relationship to the firm — the willingness to leave after three or four years for a higher-paying role at a competitor, the indifference to long-cycle investments whose payoff lies beyond her tenure.
The ideological shift also reshapes what the firm owes back to its employees. If the CEO is an entrepreneur and the firm is their venture, then employees are not members of an institution to which they belong; they are, in the now-common language, “talent” — labour inputs to be acquired, deployed, and shed as the venture requires but seldomly “grown” in-house. The reciprocal obligations that underwrote the post-war employment relationship — the implicit promise of, lifelong employment, training, advancement, and security in exchange for loyalty and effort — lose their moral force. The firm, on the new understanding, owes its workforce nothing beyond the current pay packet. On the other hand, if the organisation owes the workforce nothing beyond a pay packet, the workforce owes the organisation only that which they get paid for. Employee loyalty becomes linked to levels of pay and seldomly linked to development or organisational success.
Implications for managers
For mid-level managers, the practical significance of this analysis is two-fold. First, it provides a clearer description of the environment in which their own work is conducted. The widespread disengagement of contemporary workforces — the “quiet quitting” phenomenon, the declining commitment to employers, the transactional character of modern employment — is not principally a failure of management technique. It is a rational response to a corporate model in which the executives have been redefined as a set of entrepreneurs maximising personal value, and in which the older language of institutional commitment is no longer reliably honoured at the top. Asking workers to invest discretionary effort in firms that have publicly disowned the reciprocal obligations of the old psychological contract is asking them to play a game whose rules have been changed against them.
Analysis suggests that the compensation explosion is not a natural feature of capitalism; it is the product of a specific ideological construction sustained by a specific set of legal, governance, and discursive arrangements. The growing scrutiny of executive compensation by investors and the public suggests that the model’s underlying legitimacy is now under strain.[iii]
[i] Michael C. Jensen and Kevin J. Murphy. “Performance Pay and Top-Management Incentives.” Journal of Political Economy 98, no. 2 (1990): 225–264.
[ii] Lucian A. Bebchuk and Jesse M. Fried. Pay without Performance: The Unfulfilled Promise of Executive Compensation. Cambridge, MA: Harvard University Press, 2004.
[iii] Further reading. Joseph A. Schumpeter, The Theory of Economic Development (Cambridge, MA: Harvard University Press, 1934). For governance responses to executive pay see: UK Department for Business, Energy and Industrial Strategy, Corporate Governance Reform White Paper (London: HMSO, 2017); Institute of Directors in South Africa, King IV Report on Corporate Governance for South Africa (Johannesburg: IoDSA, 2016). For broader treatment see: Will Hutton, The State We’re In (London: Jonathan Cape, 1995); Colin Mayer, Prosperity: Better Business Makes the Greater Good (Oxford: Oxford University Press, 2018).
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