Rethinking Business Leadership

Rethinking Business Leadership
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The archetype of a greedy CEO that looms in the American imagination is a white-shoe knickerbocker type who grew up rich, inherited their role, and sucks the life out of their employees for profit. In this stereotypical storyline, those who are born to succeed, rather than achieving their own success, are less trustworthy than boot-strappers and prone to exploit and abuse subordinates.

But a new study from Henrik Cronqvist of the University of Miami Business School paints a different picture. Cronquist finds that CEOs from working class families are more likely to support less worker-friendly policies than their upper class counterparts. These CEOs with less privileged backgrounds lead companies with more employee lawsuits, more workplace safety violations, and lower satisfaction ratings, across industry type and size. Noblesse oblige, it turns out, may be better than no oblige at all.

This calls to mind a quote from an American icon. In Batman’s words, “you either die a hero, or live long enough to see yourself become a villain.” According to this research, these corporate leaders often become like the very people they believe took advantage of them, their families and their communities, manifesting as less generous attitudes toward their workforces.  

Why would people who grew up in less affluent and more socially or economically vulnerable families and communities tend to be worse bosses than those coming from more affluent, socially secure backgrounds? One possible answer is the self-centered culture of success in corporate America that defines prestige by the accomplishments and status of the individual. It is part of our social story that money and power are the real measures of success, and that the only way to get there is to climb to the top even if that means stepping on others.

This belief system is problematic because it creates an ‘exchange relationship orientation,’ in which every transaction is considered solely from the standpoint of economic gain rather than also taking into account social connection, fairness, and mutuality. The social-psychological literature shows that when given power, people who lead with this mindset act in more self-serving ways than those with a ‘communal relationship orientation’ which tends toward greater generosity. There is even a neurological basis for understanding how these behaviors originate. Studies find that in those who gain success and greater organizational control, the neural pathways that help ‘mirror’ social cues often become dormant. If we have the sense that we don’t need others to succeed, we develop a tendency to care less about their concerns, hopes, and aspirations. This tends to boomerang back on the leader in the form of frontal lobe inhibition, leading to impulsive decision-making and mistakes that negatively impact them, their employees and their businesses.  

For those who grew up in lower socio-economic backgrounds, the path to success is often far more difficult, reinforcing the low-trust beliefs and exchange-oriented behavior from early life. Research from Queens University concludes that leaders who grew up in difficult circumstances as children are more likely to feel they have less agency in their adult lives. Such adults are more risk averse because they have been chronically risk-exposed and operate with  “a heightened attentiveness to threats” leading to fear of possible mistakes or of losing of control of the organization. These expectations of deprivation or loss of control, the damaging effects of power, and our toxic achievement culture combine to create a dynamic where executives from poor and working class backgrounds are more likely to seek greater control, while diminishing their empathy for and trust in colleagues and subordinates. All this adds up to a cycle of behavior and response that makes the working environment increasingly difficult.

Life leaves a mark on us all, and one of our most basic tendencies is to live out in adult life the “script” — positive or negative — we were given as children and adolescents. The combination of excessive esteem for material success, a background of socio-economic insecurity, and relationships built on exploitation and competition rather than collaboration is toxic — whether among the poor, middle class or affluent. To overcome this mindset is a personal and a social journey. One remedy might be to develop models of success that tap into our vocational interests — doing the things we are best suited and internally motivated to do — so that while we are doing it we can be good partners to our bosses, coworkers, and subordinates in a way that contributes to the common good. Combining talents and seeking the prosperity of our neighbor is often the best way of finding both self-fulfillment and economic security for ourselves.

Brent Orrell is a Resident Fellow at the American Enterprise Institute. Matthew Leger is a Research Analyst at the American Enterprise Institute.

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