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New research reveals the surprising way leaders with business degrees hurt wage growth

April 1, 2022, 11:40 AM UTC

The share of CEOs with MBAs at public companies in the U.S. has increased from 26% in 1980 to 43% in 2020. That hasn’t been a good thing for workers. 

New research from MIT, the University of Maryland, and Denmark’s University of Copenhagen found that managers with business degrees are more likely than those without to disproportionately distribute profit gains among leadership, instead of equitably across the workforce.

“It used to be the case that when a firm grew, it shared part of its growing profits with its workers,” the report’s co-author Alex Xi He, an assistant professor of finance at the University of Maryland, told Fortune. The study also found that business educated managers are not more productive than non-business educated managers, and can account for approximately 15% of the wage growth slowdown since 1980.

The research not only highlights an overzealous focus on business optimization over the years, but a newer trend in which business leaders distribute financial wins to a small subset of executives. As companies seek out new ways to differentiate themselves as an employer brand, leaders will have to rethink this approach.

“The findings are damning of business schools, business education, [and] business ‘optimizing’ practices,” Betsey Stevenson, an economics professor at the University of Michigan and former chief economist at the U.S. Department of Labor, said in a tweet.

Unequal profit distribution is a compensation issue, but these findings have significant implications for leadership development, equity, social impact, talent strategy, and team dynamics. This approach can also be a contributor to turnover, as the study suggests.

“A lot of values from business schools are about profit maximization and increasing shareholder value, but that may be at the cost of some other parties like the workers,” He tells the Modern Board. Low-skill workers—who already lack career mobility and, with it, wage growth—fare the worst, losing a higher percentage of their wages than their high-skill counterparts.

So where does that leave leaders? Companies must create and improve internal manager training and provide transparency on company decision-making, pay practices, and their impact on underrepresented groups.

“Increasingly, corporations are being criticized for reinforcing inequalities through gendered norms and unequal pay structures,” Shaista  Khilji, a professor at George Washington University and founder of the university’s Organizational Leadership and Learning Program, said in an emailed statement. She adds that the study “contributes to the growing evidence for redefining business, leadership, and education.”

Today’s leaders must consider a number of business-adjacent topics that were once believed to be outside of their purview, such as climate impact, social responsibility, and diversity. Ultimately, boards and C-suite executives are responsible for enforcing new management styles and holding leaders accountable for new standards that underscore talent prioritization.

“There was a time when people thought that if you could [manage numbers], you could run anything,” Thomas Gorman, a partner at the law firm Dorsey & Whitney and former senior counsel in the SEC’s division of enforcement, tells Modern Board. “Harvard Business School used to tell that to people all the time. I don’t necessarily think that’s true.”

P.S. Please take the Modern Board reader survey: We’d love to know your thoughts on this newsletter! If you’re able, we would greatly appreciate your feedback in this two-minute survey to help us better serve our readers.

Aman Kidwai


LinkedIn on labor. The talent market is becoming more efficient in the wake of COVID-19. Looking at a range of job descriptions from a representative sample, LinkedIn CEO Ryan Roslansky says that skillset requirements have changed 25% on average over the last seven years. A skills-based approach to recruiting, he notes, will become hugely important in solving for talent shortages, diversifying the workplace, and engaging talent. LinkedIn

Retirees returning. After a surge in pandemic retirements, retirees are returning to the workforce, thanks to employer demand and increased flexibility. Some early retirees are finding that they aren't as financially stable as they once thought, while others feel unfulfilled in their post-retirement lives. Still others are starting businesses and finding ways to monetize their passions. Wall Street Journal

Losing Trust in the 9-5. America’s independent workforce was growing before COVID-19, but the pandemic has motivated many to go the freelance route. About 31% of people who have left their jobs are doing so to start their own business, according to recent McKinsey data. Surveyed independent workers reported higher levels of job security, work-life balance, and flexibility. The number of independent workers in the U.S. is now estimated to be 51 million. Harvard Business Review

Lower gas prices? The Biden Administration is ordering the release of U.S.-owned reserves in hopes of cutting gas prices by 10 to 35 cents per gallon. The president also wants Congress to impose financial penalties on oil and gas companies that lease public lands but are not producing. AP

Crypto careers. Business students are choosing cryptocurrency, NFTs and Web3 over traditional career paths in banking. While financial firms like JP Morgan and BlackRock seem to have bought in to crypto, some students are refusing to go the Wall Street route and, instead, choosing a more entrepreneurial path with Web3 startups. Morning Brew

CFOs out of style? The presence of CFOs on corporate boards is decreasing as companies increasingly seek wider expertise on topics like cybersecurity, ESG, and talent. Executive recruitment leaders suggest CFOs align their skillset to match new board priorities as well as traditional areas of focus such as initial public offerings, mergers and acquisitions, and financial restructuring. Wall Street Journal 


Board Movement

FIGS has appointed A.G. Lafley, the former CEO of Procter & Gamble, Ken Lin, the former CEO of Credit Karma, and former Amazon executive Jeff Wilke to its board of directors. WeWork has named CEO Sandeep Mathriani board chairman and added Softbank partner Saurabh Jalan to its board. Encompass Health Corporation has added Kevin O’Connor, SVP and chief legal officer at Carrier Global Corporation, to its board. Former Merck CEO Ken Frazier is joining the board of Eikon Therapeutics. The Depository Trust & Clearing Corporation added Bill Capuzzi, CEO of Apex Fintech Solutions, and Kelley Conway, head of corporate and digital strategy at Northern Trust, to its board. Privia Health Group has added former Aetna executive Nancy Cocozza to its board. Redfin has tapped Brad Singer, previously COO of ValueAct Capital, to its board. Macy’s has appointed former CEO of Charles Schwab Marie Chandoha and Jill Granoff, CEO of Eurazeo’s Brands division, to its board.

Numbers That Matter


Boston Consulting Group released a study which found that America is no longer the top destination for global talent. The U.S. is now the No. 2 most-desirable landing spot for aspiring immigrants behind Canada.

Alec Stapp, co-founder of the Institute for Progress, called the demotion a “slow-motion disaster." A recent UC Davis analysis found that the working-age, foreign-born population in the U.S. is two million lower than it should be based on its pace from 2010-2019. That's likely a result of restrictive immigration policies during the COVID-19 pandemic.

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