Privilege and Prejudice: How Shareholder Primacy Affects the Role of Social Class in CEO Selection

Abstract

Prior research has found that contenders of upper-class backgrounds are favored for CEO positions in Corporate America over those of lower- and middle-class backgrounds. However, in the decades since the last study was conducted, Corporate America has undergone significant changes that have institutionalized shareholder primacy as the dominant organizing principle. This study examines the implications of these societal changes, theorizing that the upper-class bias in CEO selection has steadily become amplified since the 1970s. We further hypothesize that companies with concentrated institutional ownership are more likely to be beholden to the shareholder primacy principle and, as a result, exhibit a stronger preference for upper-class CEO contenders. In contrast, we posit that collective bargaining agreements with unions serve as a countervailing force to shareholder primacy, manifesting in a reduced class bias in CEO selection. Using a novel dataset that compares the social class backgrounds of 454 rival candidates who competed for 227 CEO selection events during 1970-2013, we find considerable support for our hypotheses.