The role of social ties in accelerating career progress of senior executives and directors in Poland

• DOI: https://doi.org/10.1108/CG-01-2021-0042
• Published date: 25 October 2021
• Date: 25 October 2021
• Pages: 720-747
• Subject Matter: Strategy,Corporate governance
• Author: Paweł Mielcarz,Dmytro Osiichuk

The role of social ties in accelerating

career progress of senior executives and

directors in Poland

PawełMielcarz and Dmytro Osiichuk

Abstract

Purpose –This study aims to elucidate the roleof social ties in facilitating the career progress of senior

officerswithin public companies in an emerging market.

Design/methodology/approach –The authors followedthe career track of 2,151 senior officers serving

on management and supervisory boards of Polish public companies. The authors used multivariate

econometricmodeling to investigate the factorsshaping their career progress.

Findings –The authors document an increasingimpact of officers’ social networks on the likelihood of

assuming multiple consecutive senior positions. It takes progressively less time for incumbent senior

officers to find a subsequent/concomitant board position with a network of social ties from prior

workplaces facilitating career progress and prior experience being negatively associated with multiple

positions. Officers’ social ties at the senior level are also shown to be positively associated with total

compensation and with the likelihood of cross-industry career transition in both executive and

supervisoryroles.

Originality/value –Social network appears to play a more salient role in accelerating careers of

supervisoryboard members even though executives also benefit therefrom.Finally, the network of social

ties with former or incumbentsupervisory board members exercisesa more pronouncedpositive impact

on careerprogress than ties with former or incumbent executives.

Keywords Corporate governance, Social ties, Executive compensation

Paper type Research paper

Introduction

Anecdotal evidence suggests that thereis a tipping point in the career track of some senior

officers after which their progress accelerates significantly, and their mobility options

expand well beyond background-related constraints. Statistically, between the age of 40

and 50 (based on the studied sample from Poland), seasoned executives and directors

start accumulating external affiliations by assuming multiple additional roles on boards of

third companies, often in industries unrelated to their prior business experience. Senior

executives change roles more frequently enjoying better mobility, a richer palette of

employment opportunities, and improved bargaining power vis-a

`-vis new employers’

compensation committees. With reservations, one may cautiously assume that not much

changes during this time in terms of officers’ industry expertise, educational profile or

temperamental features (of which all but the last one can be reliably operationalized in

quantitative analysis) therebysuggesting that alternative factors may be at play.

This study presents a statistical verification of the mentioned anecdotal evidence. We track

the career record of 2,151 senior officers serving on management and supervisory boards

of 644 publicly traded companies in Poland. The selected sample is notorious for the fact

that all officers occupied more than two senior leadership roles (either concomitantly or

Paweł Mielcarz and

Dmytro Osiichuk are both

based at Kozminski

University, Warsaw,

Poland.

JEL classif‌ication –G30

G34

Received 25 January 2021

Revised 7 July 2021

13 September 2021

Accepted 2 October 2021

PAGE 720 jCORPORATE GOVERNANCE jVOL. 22 NO. 4 2022, pp. 720-747, ©Emerald Publishing Limited, ISSN 1472-0701 DOI 10.1108/CG-01-2021-0042

consecutively) –i.e. either senior executive roles or positions on supervisory roles –up to

the moment of empirical analysis. We contrast this group with a set of 12,688 executives

and directors, who managed to get only one senior role in Polish public companies in their

career. While both groups are statistically similar in terms of demographic characteristics –

average age and gender composition –the crucial factor, which markedly distinguishes

between them is the gross network brought from prior workplaces. We postulate and

confirm empirically that after controlling for experience, prior background, academic

degree, and demographic characteristics, network in the form of informal social ties with

senior executives and supervisory board members is the most important factor shaping

officers’ improved career outcomes.For the purposes of the present study, we assume that

when serving in senior roles, officers create ties with all other senior executives and

supervisory board members, who serve along with them. It is a standard approach to the

operationalization of such an otherwise non-quantifiable phenomenon (Javakhadze et al.,

2016). Correspondingly, when moving to another company, officers bring the network of

contacts with them.

The two prevailing theories, which explain the favorable role played by the social network in

advancing senior officers’ careers, are the resource dependency theory (Boyd, 1996) and

the “small world” theory (Milgram, 1967). While the former postulates that selection by

network is favorable and even necessary as it allows the company to secure access to

resources and possibilities, which would otherwise remain inaccessible through formal

channels, the latter suggests thatthe formation of close informal ties is a by-product of class

stratification and increasing concentration of all forms of capital, including social capital.

While our empirical findings do not contradict either of the said theories, we nevertheless

support the idea that the phenomenon of hiring through informal social networks may be

inherently harmful across multiple economic and societal dimensions, if left unchecked by

shareholders and monitors. Despite facilitating intra-group cooperation and flow of

information, it is a potentially fertile ground for favoritism, preferential hiring, clientelism,

collusion, insider transactions. It may limit within-firm career mobility, reduce competitive

incentives (Yang et al., 2016) and foster inefficient allocation of resources. Shareholders

should, therefore, remain vigilant and monitor executive and director appointments to

preclude the possibility of opportunisticbehavior on the part of socially connected officers.

This study is looking to answer the followingthree research questions:

RQ1. Does officers’ social connectedness play a role in accelerating their careers by

securing them multiple seniorpositions across a number of companies and better

total compensation?

RQ2. In which roles (executiveor supervisory) does social connectedness play a more

salient acceleratoryrole?

RQ3. What type of social connections plays a more important role in fostering officers’

career mobility?

This is the first study investigating the role of social ties in advancing the careers of senior

officers in the corporate sector in Poland. The existing studies are almost exclusively

focused on mature markets (Harjoto and Wang,2020;Vairavan and Zhang, 2020). This gap

in the research literature is primarily caused by impeded access to firm-level data

necessary to conduct a large-scale graph analysis aimed at establishing social networks

prevailing in the corporate sectorsof emerging economies. Across the majority of emerging

markets including Poland, firms are exempt from responsibility to disclose social ties

between senior officers or complete lists of directors’ affiliations. Officers’ biographies and

history of employment also need to be compiled, analyzed and encoded to present the

complete network of social contacts. Therefore, any large-scale empirical study inquiring

into executives and directors’ social ties necessitates manual data collection. The present

study attempts to fill the research gap by compiling a unique firm-level data set exploring

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