No Cigar: CEOs Hand Out Pay Cuts After Becoming Dads

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Your CEO’s wife is having a baby? You might want to pick that congratulatory card off the 99-cent rack, because your salary could take a hit after the bundle of joy arrives — even though your head honcho is likely to increase the size of his own paycheck. 

It sounds bizarre, but a new study finds that male CEOs whose wives have babies pay their workers less — around 0.2% or $100 a year on average, according to the authors of “Fatherhood and Managerial Style: How a Male CEO’s Children Affect the Wages of His Employees.” It’s not a lot, but it’s statistically significant — and provides some fascinating insight into the deep-seated motivations behind human behavior.

“After his child’s birth, a male CEO husbands his firm’s resources for himself and his growing family, at the expense of his employees,” write the authors.

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The impact of a CEO becoming a father on his workers’ pay isn’t uniform, though; the results vary depending on whether the new child is a boy or a girl, as well as the gender of the employees.

The study, which looked at 10,655 companies in Denmark over the course of a decade, found that all of that 0.2% drop was attributable to the CEOs whose wives gave birth to boys; when they divided the results by gender, having a girl had no net effect on wages, while having a boy made them drop 0.4%.

This is because having a child affects a male CEO’s outlook towards women, researchers say. The psychology is complex and somewhat subtle, but the upshot is that having a daughter brings out personality traits that are considered feminine: being in tune with the needs and welfare of others — which includes the realization that cutting workers’ pay is going to be unpleasant for them.

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If the baby is a boy, though, there’s no check on the CEO’s impulse to hoard resources for his growing family. There could also be an unspoken fear factor at work, says Heidi Golledge, co-founder and CEO of CareerBliss.com. She speculates that male CEOs may unconsciously perceive their male subordinates as competitive threats, especially in family-owned businesses where there’s an expectation that leadership could pass from father to son.

Female employees take less of a hit than their male co-workers when their CEO’s wife has a baby, and when a male CEO has a daughter, female employees actually see a tiny bump in average pay. Researchers theorize that when a CEO sees his wife go through childbirth and take on the all-encompassing caregiving an infant requires, he thinks more highly of women in general.

Here’s another weird finding: When the baby in question is both firstborn and a boy, wages go up for women but down for men. For firstborn daughters, on the other hand, both male and female employees see an increase in their pay, but the bump is larger for women: 1.1%, or $458, on average.

So where do these lost wages go? Into the CEO’s pocket, for the most part. Researchers found that male CEOs whose wives have a baby have nearly a 5% increase in real wages. Again, this is skewed by gender; having a boy correlates to his salary going up by 6.3%, while a girl corresponds to a 3.5% increase.

“Once they feel the true burden of their offspring, they realize an increased need to provide for their family,” Golledge says of CEOs who become fathers. But that’s no excuse for ensuring their own financial security at the expense of their employees, she says.

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The study’s authors say there isn’t really a disincentive to keep CEOs from doing this, since the amount of money is small enough that employees probably won’t look for another job over the decrease, but Golledge says it’s still bad for morale.

“Any time employees are not getting paid what they are worth and the CEO takes a larger share than before, the company culture and often the bottom line can suffer,” she says.

4 comments
Irony
Irony

0.2%? Is that even outside the margin of error? I'm guessing not, and even if it is statistically significant it's not significant in the more common meaning of the word. Basically you're saying they found no real difference, but decided to say there was one anyway.

Hibernia86
Hibernia86

Talk about making mountains out of mole hills. It sounds like these women wanted to support their negative beliefs about men so they took these simple statistics and weaved them into a story to fit their personal prejudices. They have very little proof to support their wild accusations.

ebrags
ebrags

This article left me with more questions that answers.  Why is there no mention of female CEOs?  Did salaries really go down or did they not increase as much?  Why is a difference of 0.2% statistically significant?  Is Denmark representative of other countries? 

NaveedXVO
NaveedXVO

@ebrags Agree, what a dubious study. It would seem the researchers were looking to find a bigger gap for political reasons. Aren't there more important questions that need answers?

Calling them all CEO's is a little obnoxious. The author is looking to imply that these are big companies which just can't be the case since they tested 10k companies in Denmark. If the firm only has a few employees it makes a big difference in the perceived loss and gain.