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Companies more likely to hire Asian-American CEOs during decline, study finds

“That is a very short lived, infrequent situation in companies for Asian-American leaders to be preferred.”
Business people talking in meeting
John Wildgoose / Getty Images/Caiaimage

North American companies are more likely to hire Asian-American chief executives during periods of economic decline, a new study has found, possibly out of a stereotypical belief that the those CEOs will act in a self-sacrificing manner for the health of the company.

The study, published online by the Journal of Applied Psychology in late September, analyzed CEO data from every publicly traded North American company from 1967 to the mid-‘10s. It found that companies are nearly two-and-a-half times more likely to hire an Asian-American CEO (defined in the study as a person of East Asian or Southeast Asian descent) when the company had returned less profit on investments than the U.S. treasury over a period of three years following a two-year period of success.

Reasoning for those hires could be because of perceptions that Asian-American CEOs would be self-sacrificing, researchers theorized and tested in the study.

“What we studied and found is that in time of decline, people may actually seek for leaders who are more self sacrificing, meaning that they are willing to forgo their own interest for the good of the group in terms of letting go of their bonus or working over hours,” Seval Gündemir, assistant professor of work and organizational psychology at the University of Amsterdam and an author of the study, said by phone.

But while the hires may seem to advantage Asian-American CEOs in some situations, researchers said those advantages do not appear to last. Data analysis found that the tenures of Asian-American CEOs hired during times of decline were approximately the same as white CEOs. In time of non decline, Asian-American CEOs had tenures half the length of white CEOs.

Researchers also found that only 12 percent of companies in their dataset were going through a decline at any time.

“That is a very short lived, infrequent situation in companies for Asian-American leaders to be preferred,” Gündemir said.

Those decline situations can also represent challenges for leaders to turn around, she added.

“What can end of happening is Asian-American leaders who are appointed in times of decline can end up being blamed for an organization’s decline while they were hired after the company was already going through decline,” Gündemir said. “That’s associated with a lot of stress for the occupants of these roles and their career development can also have negative consequences.”

While Asian Americans have been stereotyped as highly successful in business, research has found that that success may not extend to the top. Of the 4,951 CEOs since the ‘60s examined in Gündemir’s research, 41 were identified as Asian American, about 0.8 percent.

And according to a 2017 report from the Ascend Foundation, a nonprofit advocacy group for Asian-American business professionals, while Asian Americans represented 47.3 percent of professionals in the Bay Area’s tech sector in 2015, they represented only 25.2 percent of its executives.

If companies are too compete in a global marketplace, they will have to ensure that they have corporate leaders who understand whose communities, Jane Hyun, an author and business consultant, said.

Hyun wrote the 2005 book “Breaking the Bamboo Ceiling: Career Strategies for Asians,” to help Asian-American professionals develop skills for companies to see them as leaders. Thirteen years later, Hyun said she believes the onus to improve executive diversity is on the companies.

Board members and senior managers involved in executive searches could be more intentional about their hiring process, she said. The companies could also work to improve the “pipeline” of managers that could become executives.

“If you want a more diverse slate, you have to prepare three to five years out,” she said.

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