[Easy Science] CEO who lived through war, reduces staff even more when recession hits

It was found that CEOs of companies who experienced the Korean War in their childhood were much more proactive in reducing staff than other CEOs due to declining company sales.

According to the science and technology community on the 13th, the research team of Professors Eunhye Cho and Jeonghwa Lee of George Mason University's Korea Campus Business School recently published these research results in the international academic journal 'Economic Research Journal'.

This research began with the two professors' involvement in the Korean War and military service.

Professor Cho's grandfather was a veteran of the Korean War, and Professor Lee's father also served as a lieutenant colonel in the Korean Army, so his interest naturally developed as he heard stories about the war and military service.

The research team classified 24,703 financial data of Korean listed companies from 2002 to 2023 by CEO age and then analyzed the corporate activities of CEOs born before the Korean War.

We analyzed whether CEOs exposed to war showed stronger emotional reactions when they experienced a sales decline, which could be a stimulus, and carried out large-scale workforce reductions.

As a result, it was found that Korean companies led by CEOs with war experience tended to increase employment by 22% less during sales booms and reduce employment by 106% more during recessions.

The research team explained that this effect was concentrated in CEOs who had memories of the Korean War between the ages of 4 and 15.

“Exposure to war in childhood may increase sensitivity to negative risks,” the research team said. “War is an extreme environment characterized by uncertainty, loss, and lack of resources, and exposure to such instability during a growing period may affect how we perceive threats and make decisions under pressure later in life.”

In order to confirm that these results were not due to the influence of one generation's mindset or aging, but to the influence of war exposure during growth, the research team analyzed the birthplaces of CEOs.

The results showed that CEOs' risk sensitivity, as measured by changes in their employment retention rates, was correlated with the number of civilian casualties in the Korean War that occurred in their areas of residence when they grew up.

The research team explained, “What we are seeing is that growing-up experiences can have a lasting impact on managerial decision-making decades later. We do not believe war is an exception, and other serious growing-up experiences are also likely to have a lasting impact on the way leaders perceive risk and make decisions later in life.”