CEOs with Daughters Run More Socially Responsible Firms: An Interview with Henrik Cronqvist

The Study: Henrik Cronqvist of the University of Miami and Frank Yu of China Europe International Business School compared the corporate social responsibility ratings of S&P 500 companies with information about the offspring of their chief executive officers. The researchers found that when a firm was led by a CEO with at least one daughter, it scored an average of 11.9% higher on CSR metrics and spent 13.4% more of its net income on CSR than the median. The Challenge: Do daughters make us better corporate citizens? Could the gender of your child really affect the way you run a business? Professor Cronqvist, defend your research. Cronqvist: There is definitely a correlation. Controlling for other factors, companies run by executives with female children rated higher on the measures of diversity, employee relations, and environmental stewardship tracked by the CSR research and analytics group KLD from 1992 to 2012. We also saw a smaller but still meaningful link with the provision of products and services that are more socially responsible. And having daughters coincided with spending significantly more net income on CSR than the median. That female influence does appear to affect the decisions these executives make, which translates into shifted priorities for their organizations. HBR: So daughters—not sons—support CSR, and their parents follow that lead? That’s the theory. The literature in economics, psychology, and sociology suggests that women tend to care more about the well-being of other people and of society than men do, and that female children can increase those sympathies in their parents. For example, research from Eboyna Washington at Yale has shown that U.S. congressmen who have daughters tend to vote more liberally, particularly on legislation involving reproductive rights. Adam Glynn of Emory and Maya Sen of Harvard found a similar pattern among U.S. Court of Appeals judges in cases involving gender issues. We’ve always known that parents influence their children. It’s clear now that the reverse is also true. Children can change the way their parents think and act—not just at home but also at work. It’s a different spin on nurture versus nature. Just one daughter does the trick? When we looked at family size, we found that CEOs had 2.5 children, on average—a bit higher than the U.S. standard—and that 48.5% of all those kids were girls, which corresponds to the gender ratio in the general population. Ratings for and spending on CSR at companies did increase the more daughters a CEO had, but the effect wasn’t linear. Just having the treatment (a daughter) mattered much more than the dosage (the number of daughters). Does the age of the daughter matter? What matters is probably not the birth per se but the accumulation of experiences over time. The median age of S&P 500 CEOs in our sample was 57, so most of them have grown children. Those with girls may, for example, have seen their daughters discriminated against in the labor market, which could have an impact on their attitudes about equality. What about female CEOs? Do they need this “treatment” to prioritize CSR, or does nature take care of that? Unfortunately, our sample of female CEOs—14 out of the 379 executives for which we could collect data—was too small to draw any firm conclusions. But the companies they led did have much stronger CSR ratings in every KLD-tracked category—not only diversity, employee relations, environment, and product, but also human rights and community. We suspect that a CEO’s own gender matters even more than the gender of his or her children. By our calculation, having a male CEO with a daughter produces slightly less than a third of the effect of having a female CEO. Comparisons of the data on congressmen and judges yielded similar numbers. So you could hypothesize that, on average, any man behaves one-third more “female” when he parents a girl. Do sons do anything for you? All we know is that they show no effect on CSR ratings or spending at their parents’ companies. It would be interesting to see if they matter for other economic behaviors—risk taking, for example. What about wives or sisters? Could they influence executives too? We originally intended to study the broad structure of the CEOs’ families. But even the data on children was difficult to collect. Out of 1,224 S&P 500 CEOs who served and whose companies were ranked by KLD during the period we studied, we could find information on the number and gender of offspring for only 379. Finding out whether they had a sister or not might have been impossible, though it would be interesting to test that one out. As for spouses, we didn’t look at that factor specifically, but given that most of the male CEOs with sons had wives and that sons had no effect on CSR ratings, we would guess that wives don’t matter as much for this issue. Going back to daughters: Should the shareholders of S&P 500 companies be concerned about the undue influence they’re having on how CEOs spend company money? It wasn’t our goal to determine whether the economic outcome here was good or bad. We just wanted to know why some companies invest more time and money in socially responsible endeavors than others do. Some of it may have to do with the company itself—the industry or sector in which it operates, or its culture, mission, or location. But the specific executives in charge probably play a role too. Alberta Di Giuli at ESCP Europe and Leonard Kostovetsky at the University of Rochester looked at the impact of the political affiliations of founders, CEOs, and directors and found that U.S. firms led by those who leaned Democratic had higher CSR ratings and spending than the firms run by Republicans did. Of course, whom you vote for is a choice, which could be correlated to many other factors. The gender of your child typically isn’t: The odds of having a boy or a girl is roughly 50/50 every time. That’s why we thought it was a less obvious and more interesting characteristic to study. You might say it’s surprising that these very powerful people can be influenced by their children. But there are lots of studies showing that professional investors succumb to the same biases as the rest of us. Would you expect to see the same relationship between CEOs’ daughters and social responsibility at non-U.S. companies? It’s possible, though cultural attitudes about gender equality would certainly have to be factored in. Maybe having a daughter would matter less in patriarchal societies; maybe it would matter more. You could certainly get the CSR ratings for firms in other parts of the world, but collecting the information about executives’ children would be more of a challenge. Why are you and your coauthor so interested in CSR? Let me guess: You have daughters. Actually, I don’t have any children. Frank just had his first—a son. Either way, we’re going to keep studying this topic. Researchers should do more work to understand the impact of the family on corporate decision making.

CEOs with Daughters Run More Socially Responsible Firms: An Interview with Henrik Cronqvist

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