several instances in which executives get their way for no apparent reason other than their high status, with lesser status executives showing the same deference of young roosters making way for the cock-of- the-walk. One study reported that when managers of a company targeted for a takeover had lower status than outside directors of the firm trying to swallow them, they were more likely to co-operate in their surrender.
In the CEO study, Belliveau, Charles Reilly III of Stanford and James Wade of Illinois, analysed 1985 data on CEO base salaries. They assessed the status of CEOs and their compensation committee chair based on how many boards and clubs they belonged to and where they went to college. Belliveau said that although the salary data is 12 years old and does not include stock options, she thinks the differences in compensation and their ties to social status still hold up.
As part of the study, they assigned two status points to those who attended Princeton, Yale or Harvard, one status point to those who went to Columbia, Cornell, Dartmouth, Johns Hopkins, MIT, Pennsylvania, Stanford or Williams, and zero points for any other school.
The study borrowed the college ratings from work done by researchers Michael Useem and Jerome Karabel. Karabel, a University of California at Berkeley sociologist, said their list was based on a study of schools favoured by upper-class Americans in 1940, and reflects the social status, not academic status, of the schools involved, particularly in the minds of older Americans.
Graef Crystal, a San Diego-based compensation expert with two degrees from Berkeley, said the CEO study suffered from having older data and relatively few companies, but that social status did have power. While seeking success in the financial world of New York, he said, “it took me years to compensate for the fact that I came from the wrong part of the country and compounded my mistake by going to the wrong school”.
The CEO researchers said they were surprised to find there was little or no advantage to the CEO whose status was similar to that of his compensation committee chair.
Their findings, they said, could be useful to stockholders. The appointment of higher status compensation committee chairs, who “are better equipped to resist CEO influence and curb CEO influence attempts” may be “a good way to foster accountability”. – The Washington Post