UM professor Henrik Cronqvist and two colleagues found that conditions for workers improved when a CEO from the working class was replaced by one from a white-collar background.
Are CEOs from working-class background less kind toward their employees?
If you came up via the school of hard knocks, you might want to take a look at whether your labor policies are holding your company back. CEOs from the working class tend to lead companies that are less labor-friendly and treat workers less well. That’s a conclusion suggested by research from University of Miami business school professor Henrik Cronqvist and his colleagues Irena Hutton at Florida State University and Danling Jiang at Stony Brook University. Their work was highlighted in the Harvard Business Review this summer.
The researchers compared the socioeconomic backgrounds of 1,626 CEOs at America’s 1,500 largest companies from 1992 to 2017 to metrics designed to reflect how they treated workers. To judge that treatment, the researchers looked at occupational safety violations, the rate of union and employee litigation and employee reviews on Glassdoor.
“The idea is that if all measures point in the same direction, we have more convincing findings, which is exactly what we have,” Cronqvist says. “We certainly do not want to say that blue-collar CEOs proactively impose worse conditions on their workers. It is more likely that they simply tolerate less favorable conditions as they may have seen them when growing up and they still made it through and ultimately to the top of their companies.”
The study controlled for metrics such as firm size, assets and profitability and also for industry, as work environments and risks vary. They used newspaper reports, alumni publications and other sources to class CEO parents by upper, professional, middle, working or poor.
Cronqvist says many might expect that a CEO from the working class would see how his or her parents were treated and want to be more labor-friendly. Instead, they’re more tolerant of what Cronqvist calls “ungenerous corporate behavior.” CEOs whose mothers worked tended to accept even harsher job environments. The CEOs’ mothers would have been working in the 1950s and 1960s, which would have presented a tougher workplace.
Cronqvist found that the white-collar vs. blue-collar effect was more muted for CEOs born after 1959, suggesting new generations of CEOs may behave differently.
Read more in Florida Trend's September issue.
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