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Simutin Explains How CEOs’ Formative Experiences Affect the Gender Wage Gap

Mike Simutin, a University of Toronto finance professor, came to Boston College on Wednesday to talk to Carroll School of Management (CSOM) faculty about his research on the gender wage gap and its origins.

While introducing the topic, Simutin made it clear that his research was done to answer two main questions: Where does the gender gap come from? And what are the real effects of this gap on companies?

Simutin then laid out the study that he performed last year along with two other finance professors, Denis Sosyura of Arizona State University and Ran Duchin of the University of Washington. The study looked at 587 CEOs and how they allocated their money to their different divisional managers. 

Simutin clarified that since there were only seven potential female CEO candidates to be studied, the team decided to only study male CEOs in order to limit the number of variables. 

Simutin and his colleagues found that, on average, female divisional managers were allocated 5 to 7 percent less capital expenditure than male divisional managers. Simutin also said that not only are females are making less than males in their same divisions, but many females aren’t getting promoted to higher divisions in the first place. 

“Recently, what we’ve found is women are appointed to less attractive divisions in terms of size and in terms of total profitability of these divisions,” Simutin said. “They start off on a weaker footing, so to speak.” 

To determine where this wage gap comes from, Simutin, Sosyura, and Duchin examined the background of these CEOs. In particular, they focused on three sources of variation: family, education, and community.

Simutin stated he was surprised how much he could learn about a CEO’s life with just a name and a date of birth. Using these two pieces of information, the researchers could access public records, which consisted of birth and marriage records, censuses, and old newspaper clippings, among other documents. From these sources, they could start to build a family tree of the subjects, including what their parents’ salaries were, whether they had stay-at-home mothers, and whether they had a maid and butler. 

Finding information about the CEOs’ education wasn’t incredibly difficult either, according to Simutin. If their high schools were not listed online, the researchers would reach out to their universities, which usually readily provided the information. Once the name of a CEO’s high school was acquired, Simutin and his team could gather information on it, such as whether it was all-male or religious.

Lastly, the researchers analyzed a CEO’s community by studying the area around his high school to determine information such as median salary and salary differences between husbands and wives. 

Simutin and his colleagues found that these formative experiences have a significant impact on how CEOs allocate their money to female divisional managers, and can even explain more than 70 percent of the wage gap. CEOs who were not exposed to gender equality in their formative years—such as those who grew up in male-dominated households or attended all-boys high schools—are far more likely to allocate less money to female divisional managers. 

In fact, when the researchers looked exclusively at CEOs who were exposed to gender equality from a young age, the gender wage gap within their divisional managers essentially disappeared. 

“If you want to form implications out of this study,” Simutin said, “it’s that change should happen in the family and in education.”

Featured Image by Jonathon Ye / Heights Editor

September 19, 2019