President Barack Obama in the Oval Office with daughters Malia and Sasha, 2009 (Source: Wikimedia Commons)
Ideas for Leaders #566

How a Daughter Might Shape the CEO

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Key Concept

Can having a daughter impact the decisions of a CEO? The answer is yes, according to new research that compared corporate social responsibility scores of companies whose CEOs had daughters to companies whose CEOs were childless — or only had sons. 

Idea Summary

Parents will naturally have an impact on their children’s values. New research, however, is showing that the opposite is also true: children, and in particular daughters, are impacting their parents’ values and beliefs. The surprising influence of daughters was previously revealed in studies that compared the decisions of members of Congress and (in a separate study) federal judges who had daughters to those who didn’t.

A new study brings the ‘female socialisation hypothesis’ into the business domain. According to this hypothesis, by internalizing the experiences of their daughters, CEOs may develop a greater concern for others in society — and more specifically the well-being of corporate stakeholders other than their shareholders. The result would translate into a greater focus on issues such as diversity, the environment, employee relations and other aspects of corporate social responsibility (CSR).

To test this hypothesis, two researchers from the China European International Business School and the University of Miami compared the CSR ratings of America’s largest companies with information on the children of those companies’ leaders. The researchers used a CSR database compiled by Kinder, Lydenberg, and Domini Research & Analytics (KLD), and gleaned the family information from a variety of sources. The data collected covered the 20 years between 1992 and 2012, and focused on the largest public firms in the U.S. based on the S&P 500 index. The data set included 379 CEOs and 943 CEO children.

The results of the study were unequivocal, according to the researchers. A CEO with a daughter increases the CSR ratings by nearly 12% compared to the rating of an average firm; to use another measure, a company with a CEO who has a daughter will spend an extra 13.4% of the firm’s net income on corporate social responsibility initiatives — a significant difference given the size of the firms. The analysis of the data also showed that having a second daughter increases this effect; specifically, one additional CEO daughter increases CSR ratings by about 3.4% compared to the median. Another variable was whether the daughter was the first-born child. The research showed that a first-born CEO daughter increased the firm’s CSR rating by nearly 8% compared to a median firm.

In short, the policies of companies concerning stakeholders other than their shareholders are significantly influenced by whether or not the top decision-maker has a daughter. (It should be noted that the researchers rigorously controlled for other factors in their analysis, such as family size or location, to ensure the accuracy of their conclusions. Thus, for example, the results are specifically correlated to CEOs who have a daughter, and not CEOs who have children or large families.)

The researchers found this daughter effect across all the different categories of CSR, although the largest impact seems to be on diversity, environment and employee relations.

One of the interesting comparisons to emerge from the study is the behaviour of male and female CEOs. Female CEOs are more likely to encourage and support CSR initiatives in their firms. The difference between male and female CEOs is attenuated, however, by whether the male CEO has a daughter. In statistical terms, the impact of a male CEO having a daughter is 31.8% of the impact of the CEO being female. In other words, a male CEO will become about one-third more similar to a female CEO in terms of preferences and priorities simply because he has a daughter.

Business Application

The hiring of a new CEO can impact the future of the company through two processes: sorting and imprinting. Sorting occurs when boards deliberately hire new CEOs whose values and priorities reflect those of the company. Imprinting occurs when new CEOs influence the values and priorities of the firm to more closely parallel their own values and priorities.

In their analysis, which included correlating CEO changes to before-and-after CSR ratings, the researchers found evidence of both sorting and imprinting.

Thus, companies that want to emphasize corporate social responsibility will want to hire new CEOs that have a track record in CSR. They may also, however, want to take into account the family situation of a candidate. Different factors, including economic factors, might have dampened CSR activities related to a candidate’s previous posting; regardless of track record, however, boards may assume that having a daughter would indicate that the candidate would be open to initiatives related to diversity and other CSR categories. They may also assume that the candidate may seek to ‘imprint’ his own concerns in a firm that does not have a positive CSR track record.

Of course, there are many important factors that play into the choice of a new CEO. Given the ease with which information in the Internet age can be acquired, however, a few minutes reviewing the child situation of a candidate might give some revealing insight into the concerns, priorities and aspirations of the person sitting before the hiring committee. 

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Authors

Institutions

Source

Idea conceived

  • November 2015

Idea posted

  • November 2015

DOI number

10.13007/566

Subject

Real Time Analytics