Shifting standards due to social class? The role of social class background in <scp>CEO</scp> career outcomes

Abstract Research Summary This study investigates how social class background shapes CEO career outcomes. Extending the shifting standards model to post‐appointment evaluation, we theorize that CEOs from lower‐class backgrounds face persistently high confirmatory standards, producing asymmetric consequences. When their performance is strong, the high confirmatory standards amplify their success, resulting in higher initial and subsequent compensation compared to their higher‐class counterparts. When performance falters, the same bar makes shortfalls more readily read as falling short of expectations, resulting in lower compensation and higher dismissal risk. We test these predictions using a novel dataset on CEO social class backgrounds from 1992 to 2018, supplemented with board interviews. The findings support our hypotheses, demonstrating how social class background operates as a double‐edged sword by increasing rewards for success and penalties for failure. Managerial Summary Does social class background affect how a CEO is evaluated? Drawing on compensation and dismissal outcomes for U.S. CEOs from 1992 to 2018, along with interviews with directors, we show that CEOs' social class backgrounds shape how their performance is interpreted. CEOs from lower social class backgrounds receive higher initial compensation and are rewarded more when their firms perform well. But when performance weakens, these same CEOs face steeper pay cuts and higher dismissal risk than their higher‐class peers. The same background that generates recognition when things go well makes shortfalls easier to interpret as underperformance. For boards, this suggests that background can quietly shape evaluations at the highest levels. For CEOs, perceptions of exceptional mobility and capability can become a liability when performance turns.