Social Capital Consideration in Promotion Decisions: Do Supervisors Favor Subordinates in Their Social Network?
Posted: 15 Aug 2011 Last revised: 26 Mar 2015
Date Written: August 15, 2011
In this research, I examine the presence of favoritism in promotion decisions for executives in large Korean conglomerate firms. More specifically, I test whether a promotion is more likely when an executive has an established (strong) social connection with the current supervisor who has real promotion decision authority. Additionally, I investigate whether alterations of accounting performance measures for relative evaluation provide leeway for additional subjectivity to favor an executive. The analysis using a sample of 3,990 executive-years shows that when an executive has a strong social tie with one of his supervisors in high level organizations, (i) a promotion is more likely, and (ii) ROA becomes less influential whereas a relative performance measure against the industry average gains influence in promotion decisions. Further, other findings suggest that supervisors consider more social capital issues when making promotion decisions for elite (i.e., high-ranking and more influential) members.
Keywords: promotion, incentive, social capital
JEL Classification: M41, M50, M51, M12, J30
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