CEOs with Daughters Run More Socially Responsible Firms

Henrik Cronqvist of the University of Miami and Frank Yu of China Europe International Business School compared the corporate social responsibility (CSR) ratings of S&P 500 companies and 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 researchers noted that companies run by executives with female children rated higher on the measures of diversity, employee relations, and environmental stewardship, as well as the provision of products and services that are more socially responsible.

In an interview with Alison Beard from Harvard Business Review, Cronqvist notes that such findings are consistent with other research studies that show 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… 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.”

While an obvious question might be what about female CEOs versus male CEOs; wouldn’t that be more of a direct effect than going through a daughter? Well Cronqvist and Yu did look at the role of female CEOS and found that the firms 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. The only problem was that there were not enough such firms in their sample to be able to draw any firm conclusions, since only 14 out of the 379 firms studied had female CEOs.

I was curious to see if Milton Friedman, the 1976 recipient of the Nobel Prize in Economics, had any daughters, since he wrote a famous article titled “The Social Responsibility of Business is to Increase its Profits“, which ends with the following assertion:

there is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

While Friedman was not a CEO, he certainly was a powerful and influential voice in America. Friedman did have one daughter, but apparently she did not have much influence over his thoughts regarding corporate social responsibility…

On the other hand, Howard Schultz, founder and CEO of Starbucks, does have a daughter, and he is a leading proponent of the notion that firms should focus on their social responsibility.

I think Cronqvist and Yu’s findings make intuitive sense, so it is nice to see the data support such intuition.

However, it’s hard to say what to do with such findings. Should boards of directors start considering the gender of the children that potential CEOs have as part of the selection process?

I don’t think that is a viable option, but certainly giving some weight to the gender of the potential CEO may make sense if the firm values CSR. As the researchers note, even though having a male CEO with a daughter has a significant effect on the CSR ratings of a firm, having a male CEO with a daughter still produces only slightly less than a third of the effect of having a female CEO.

It will be interesting to see how this plays out in the current Presidential campaign. If a woman does become the President, will we become the kinder, gentler nation that George H. W. Bush asked for in 1988? I certainly hope so. It’s also interesting to note that our past three Presidents, covering the past six elections, have all had daughters, and only daughters…

By the way, the researchers also pointed to another study that 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.

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Jim Borden

Accounting Prof. at Villanova; happily married for 30+ years; father of 3 outstanding young men; vegan; interests: fitness, creativity, education, blogging, social media.

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