LONDON — In “Game of Thrones,” your surname meant everything. Being a Stark, Lannister, Targaryen, and Baratheon brought wealth and prestige. Apparently, it’s the same in the real world. Researchers from the Bayes Business School at City University London have found that a CEO’s surname plays a significant role in their career trajectory as they receive higher pay than their peers.
The study authors analyzed data spanning 16 years to investigate how perceptions of CEO surnames affected their compensation and job security in the United States. The study builds upon the concept of cognitive dissonance, suggesting that name-induced perceptions can impact how a person is evaluated.
Key findings from the research include:
1. A one-standard deviation increase in the “favorability” of a CEO’s surname results in a 4.39 percent increase in their total compensation. In practical terms, this translates to an additional $240,699 per year for CEOs, on average earning $5,482,910.
2. Changes in perceived surname favorability can be linked to geopolitical events. For example, Americans’ attitudes toward French and German surnames experienced a sharp decline (a favorability decrease of 39.3%) following the opposition of these countries to the United States-led invasion of Iraq in 2003.
3. Non-founder CEOs and those with shorter tenures are more susceptible to the effects of surname favorability. The impact is also more pronounced in firms where the majority of shares are owned by individuals rather than institutional investors.
4. CEOs with favorable surnames are significantly less likely to be dismissed for underperformance.
The research findings suggest that CEO surname favorability does not correlate with corporate investment policies, the quality of managerial disclosure, or the firm’s accounting performance. Additionally, it is not associated with self-serving behavior among CEOs.
To determine the favorability of surnames, the study used historical immigration records from the United States, which contain immigrants’ surnames and their countries of origin, along with Gallup survey data on American citizens’ preferences toward foreign countries. These datasets were combined to match CEO surnames with compensation and other corporate outcomes, resulting in a sample of CEOs from 6,359 firm-years.
Dr. Jung, one of the co-authors of the study, highlighted the concerning implications of organizational bias based on a CEO’s surname.
“A CEO or indeed any employee’s compensation should reflect the skills and experience they bring to the role,” explains study co-author Dr. Jay Jung, senior lecturer in accounting at Bayes, in a university release. “However, it is clear from our study that an individual’s name and the attributes it carries – such as often being an identifier for race, gender and ethnicity – has a significant impact on their level of earnings and job security. This obviously has direct effects on individuals and their potential remuneration, but also risks influencing the performance of an organization if talent recognition and rewards are largely dependant on factors other than achievement.”
Dr. Jung emphasized that the research reveals shortcomings in recruitment, selection, and remuneration practices, as well as governance within firms.
“A lot of prior research has outlined the vast benefits of diversity on company boards. Allowing the favorability of surnames to impact financial compensation and career longevity could risk curtailing the pool of talent when recruiting – particularly if similar patterns are observed in other, less senior roles throughout the organization,” says Dr. Jung. “The study suggests that greater scrutiny of boards of directors as to who they appoint may be a remedy for this, as is institutional investment which curbs the effects of name favorability.”
The study is published in the Journal of Corporate Finance.
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