Rotman Management – April 2019

rotmanmagazine.ca / 41

Education Attained by CEOs’ Parents vs. General Population

working adults, the average annual income for men ($5,726 in
1960 dollars) was more than twice as large as that of women
($2,846 in 1960 dollars). For those seeking employment, the
average unemployment rate was lower for men (4.8%) than for
women ( 5.5%). Interpreted together, these statistics suggest that
CEOs grew up in communities where, at the time of their forma-
tive years, males were more likely to hold outside employment,
and when they did, they earned higher incomes and faced lower
unemployment than their female counterparts.
In summary, CEOs come from white-collar, well-educated
families with the typical incomes in the top quartile of the nation-
al distribution. In the majority of CEOs’ families, the father was
the only income earner and the more educated spouse. Similar,
albeit smaller, differences in the socioeconomic status of men
and women were observed in the communities where the CEOs
spent their adolescence.

How CEOs Allocate Resources
When we moved on to study resource allocation within organi-
zations, our first key finding was that female division managers

obtain about 90 basis points less in annual capital expenditures

than male managers — an economically important difference of

$2.8 million per year for the median sample firm. Interestingly,

this gap in capital budgets expands if the CEO grew up in a com-

munity with larger differences in labour force participation,

education and income between male and female residents of

working age.

Educational background had particularly important medi-

ating effects: The gender gap in capital budgets was greater for

CEOs who attended all-male high schools. Similarly, using varia-

tion in the gender composition of colleges (resulting from the

opening of many U.S. colleges to women), we found that the gen-

der gap was higher for CEOs who attended same-gender rather

than co-educational colleges.

Taken together, we estimate that the effects of familial,

environmental and educational factors from CEOs’ formative

years explain up to 70 per cent of the economic gap in capital al-

locations between male and female division managers. Further-

more, we found that two economic mechanisms contribute to

the gender gap in capital budgeting: the appointment of certain

0 %

5%

10 %

15%

20 %

25%

30 %

35%

40 %

45%

50 %

Middle school or lower

(0-8 years)

1-2 years of high school

(9-10 years)

3-4 years of high school

(11-12 years)

CEOs’ Parents

All adults aged 21-45

College

(13-16 years)

Postgraduate

(17+ years)

This figure compares the years of education attained by parents of CEOs and by all adults between 21 and 45 years of age.

The data is from decennial federal censuses.

FIGURE ONE