For three years, on and off, Professor Mikhail Simutin spent his evenings like a private investigator. After a day of teaching classes or conducting research at the Rotman School of Management where he is an associate professor of Finance, Simutin would comb through census records, newspaper clippings, obituaries and old yearbooks — piecing together the early lives of powerful men in business.
After a bit of digging, he and his colleagues could get a detailed picture of how each of these individuals grew up, including what their parents did for a living, the communities they were raised in and where they went to school.
“It was like working on a massive jigsaw puzzle,” Simutin explains. “We got a glimpse of their formative years. And it shed light on how businesses are run today.”
This meticulous sleuthing was actually part of the data collection process for his latest project investigating the origins and effects of the gender gap.
Before this, scholars had struggled to understand a real issue in business: why women are consistently given less than men — less pay, smaller budgets to oversee, smaller teams to manage.
Simutin and his coinvestigators were curious about what was driving this disparity, particularly among male and female divisional managers who managed projects of similar importance. The researchers wondered: was there some factor they weren’t controlling for? Or, was it that those in charge of designing operational budgets were favouring men? And if this was the case, what were the economic impacts of these decisions?
To find out, Simutin focused on 358 firms that were listed in the S&P 1500 index and operated with a divisional organization structure, where the head of each division held similar responsibilities. All of the firms the researchers examined were headed by male CEOs.
“If we’re serious about taking on gender inequality, we can’t just focus on the corporation, but society as a whole.”
—Mikhail Simutin, Professor, Finance
By analyzing the organizational charts and quarterly and annual reports released by these companies, Simutin and his colleagues observed a gender gap. Female divisional managers were consistently allocated fewer investment resources than their male peers, even when they controlled for education, performance record, age and experience within the firm.
From there, the researchers turned their attention to the CEOs of these companies, who, in these cases, oversaw how resources were distributed.
This is where the need for real detective work came in.
The researchers figured that unconscious biases might be at play here. And because most social science research suggests that our world views are shaped during our formative years, Simutin decided to delve into how the CEOs of these firms were raised, and whether these experiences impacted an individual’s management decisions as an adult.
When they scoured through public records, the researchers were really looking for the types of gender imbalances these CEOs had been exposed to in the homes and communities they’d been brought up in and in the schools they had attended. Simutin and his colleagues paid attention to the parents of these CEOs, in terms of their occupations and the highest level of education each parent had attained. The researchers also noted the employment rates for men and women in the communities these men were raised in and whether they had attended single-gender high schools, among other factors.
From the data collection and subsequent analysis, Simutin and his colleagues found that CEOs who were exposed to more instances of gender imbalances in childhood were more likely to distribute capital in a less egalitarian way in the firms they managed. And based on their financial records, these companies performed worse.
These outcomes aren’t too difficult to fathom, explains Simutin.
“If CEOs invest more in managers they prefer — for whatever reason — rather than the most attractive opportunities or most promising projects, that may hurt the company.”
Interestingly, the researchers noted that for firms monitored by boards with a female chairperson, resources were distributed in a more equal way.
“This speaks to the power of effective monitoring,” explains Simutin. “A strong board of directors, where women are represented, can act as a good check on the CEO. It can reduce bias in how capital is distributed and ultimately steer an organization in a better strategic direction.”
Though the researchers offer no prescriptive statements or suggestions in their manuscript — they feel it is beyond their scope as finance researchers — Simutin urges everyone to look at the facts and the data.
“If we are serious about fighting gender inequality, we need to consider how this biased way of thinking is established during the formative years,” says Simutin. “We can’t just tackle this issue by speaking to CEOs, senior managers or even reaching out to one or a couple of organizations. We need to focus on children and making sure that they see men and women being given the same opportunities and encouragement.”
Written by Rebecca Cheung | More Rotman Insights »