How MBA-wielding bosses boost profits

HARVARD BUSINESS SCHOOLINSEADMBACEOMBAMBAMBA is all about its graduates’ “lifelong impact” on society. exhorts its alumni to “drive business as a force for good”. Believe these and other prospectuses, and a student arriving as an ordinary human being will leave as a virtuous do-gooder. Such claims have always strained credulity. A new working paper by Daron Acemoglu, Alex He and Daniel le Maire, a trio of economists, puts numbers on the disbelief.The authors look at newly appointed s in America and Denmark. They find those with s increase returns on assets in the five years after their appointment—by a total of three percentage points on average in America and 1.5 points in Denmark. But that is not because they boost sales, ratchet up investments or raise productivity. Rather, the higher returns are the result of suppressing workers’ wages, which fall by 6% in America and 3% in Denmark over the five years after an takes charge. In short, ushering s into corner offices seems to boost shareholder value by slicing the pie in certain ways, not by making the pie bigger.