Meet Dr. Michelle K. Lee, an assistant professor of strategy and organizations at the Smith School of Business, Queen’s University, Kingston, Ontario, Canada, whose work on socioeconomic class and leadership earned the 2022 Alvah H. Chapman Jr. Outstanding Dissertation Award presented by the Center for Leadership at FIU.
It may come as no surprise that when considering potential candidates for a CEO position, people who are similar think alike. Companies with closely-held ownership control by primarily “elite” investors are more likely to choose applicants from backgrounds similar to their own. Conversely, there appears to be a different type of company – those who have collective bargaining agreements with their workforce and where the group of owners is larger and more diverse. In these companies, candidates with lower- and middle-class backgrounds are more likely to be considered and selected for the top spot.
This is the finding of new research on the topic of class in the CEO selection process from Dr. Michelle K. Lee.
Dr. Lee's paper, “Privilege and Prejudice: Shareholder Primacy and the Relevance of Social Class Backgrounds for CEO Contenders’ Selection Prospects,” earned the 2022 Alvah H. Chapman Jr. Outstanding Dissertation Award presented by the Center for Leadership at Florida International University.
Established 12 years ago by the Center in partnership with the Network of Leadership Scholars, this global award honors an individual whose dissertation makes an outstanding contribution to the field of leadership. Dr. Lee will present her findings at the Leadership Research Colloquium in Spring 2023. The award also includes a $3,000 cash prize.
Dr. Lee used a novel dataset comparing the social class backgrounds of 454 rival candidates who competed in 227 CEO contests from 1970 to 2013. She narrowed a list of all S&P 1500 firms for which data were available to a subset for which she could identify at least two individuals who were known to have competed for the CEO position and whose social class backgrounds could be ascertained accurately based on 1940 census, the latest publicly available by law. She also scoured news articles in the year in which each of these CEOs was appointed or the year prior to find information describing the succession and events leading to it. The approach yielded a sample of 482 pairs of contenders who were born before 1945.
Prior research has found that contenders with upper-class backgrounds are favored for CEO positions in corporate America over those with lower- and middle-class backgrounds. In the decades since the last analysis was conducted, corporate America has undergone significant changes that put forth shareholders as the primary constituents. Concentrated shareholder ownership is now a dominant organizing principle, which has amplified this upper-class preference for CEO.
However, the papers posits that a countervailing force, collective bargaining agreements with unions, has resulted in a reduced upper-class bias in CEO selection.
“If you have two candidates, the upper-class candidate is generally preferred because the upper-class candidate is similar to them, and fits the mold of what many upper-class owners think is better,” she said. “When ownership is dispersed and is not held to a certain class of shareholders, that gives power back to the company, as opposed to the shareholders.”
“Dr. Lee’s research took equal parts intuition, attention to trends, creative sleuthing and sweat equity to piece together the findings,” said Dr. Nathan Hiller, executive director for the Center for Leadership. “Many companies have historically failed to consider some candidates for executive positions because of needless and often unfair preferences and biases. This helps us understand how we can better level the playing field.”
Dr. Lee saw from a young age how class paints one’s path. The child of Korean immigrants and raised in New York City, her parents worked hard and found success. But being classified as “immigrants” because of the language barrier, “you could see those differences in how they were treated,” Dr. Lee said.
She realized while pursuing her doctorate that one’s background and class can affect their life, career and leadership, said Dr. Lee, whose research interests include social class, strategic leadership, shareholder activism, and corporate social responsibility. Prior to academia, she worked for Deloitte and Mazars in New York City.
In her interviews for her dissertation, Dr. Lee recalls how some exemplary CEOs did not look as good on paper. Their backgrounds did not have Ivy League names or MBAs from top-tier business schools, and they went to public schools because it was what they could afford to attend.
"As a society, we place a preference on these status markers. But those didn’t always indicate success,” she said. “What this work shows is that if you have a singular motivation to prioritize shareholder wealth, there’s a bias. It’s good to balance the different constituents of a company. It’s good not to have power in just one set."
Most of Dr. Lee’s observational data was dated from the 1990s or prior; her work did not explore more recent movements related to diversity, equity and inclusion in society, the workplace or executive ranks. She believes DEI movements will lead to greater diversity among leadership.
Her next paper further explores social class. She examines how CEOs from lower-class backgrounds are perceived as having greater agency because of the unusual agency demonstrated by their social mobility. This translates into greater expectations of their capability to change company performance which results in lower-class CEOs being rewarded more compensation when the company performs well. In times of poor performance, however, lower-class CEOs are penalized more and are more likely to be dismissed.
"Not a lot of work has theorized what the advantage of a lower-class background is,” she said. “But they’ve overcome a socioeconomic disadvantage and beaten the odds. At that level, there may be an advantage of coming from a lower-class background and showing competence."
Dr. Lee is hopeful the recognition afforded her through the Outstanding Dissertation Award will elevate the impact of her research.
“I’m honored to win this award,” she said. “This is a very robust network of scholars who study leadership. When I was a PhD student, I learned that to transition successfully from a student to professor, we need to learn to create and impart new knowledge. So I’m honored to join those ranks and have my work be part of the creation of new knowledge.”
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