Which Way Up?

The gender gap persists at the leadership level in top US companies. What can be done?
Ann Bartel |  November 22, 2011 | Research Feature
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The percentage of women in the top ranks of US corporations has barely moved in the last two decades. At the executive level, women remain particularly scarce: in 2008, women accounted for less than 3 percent of CEOs in US firms, an increase of just two percentage points since 1992. Similarly, the representation of women on corporate boards remains low. The Alliance for Board Diversity found that in 2010, only 18 percent of directors on the boards of the Fortune 100 companies were female.

A recent study of the top companies in New York State, jointly sponsored by Columbia Business School and the Women’s Executive Circle of New York (WECNY), found similar patterns. The most recent biennial study gathered data from fiscal year 2010 for the top 100 revenue-producing companies in New York as identified by Crain’s.

In 2010, women held only 11.7 percent of the top five executive positions in these companies, with no increase since 2006. On boards of directors, women held 17.2 percent of board seats at these companies, slightly better than the 15.6 percent figure for 2006. However, these statistics mask the fact that in a majority of companies in the New York sample, there are no women in executive roles. The 2012 graduating class at Columbia Business School will be 38 percent women, and Columbia, like other top business schools, has been educating large numbers of female business leaders. Why is female representation in top executive positions and on boards of directors not in line with the numbers for MBA graduates?

There are several potential answers to this question. First, women may cut back on their commitment to their careers in order to raise families. Indeed, a recent study of University of Chicago MBAs found that, although male and female MBAs have nearly identical earnings at the outset of their careers, a decade after MBA completion, female MBAs are earning 60 percent less than their male counterparts. Differences in career interruptions and differences in weekly hours, both of which were largely associated with motherhood, accounted for this large gap.

Bias in the workplace is likely another contributing factor. In a study of Danish companies my colleague Professor David Ross, found that, if the CEO has a daughter while in office, the firm’s gender wage gap shrinks. This study suggests that bias need not be permanent. A cautiously hopeful note comes from the work of another colleague, Professor Katherine Phillips, whose recent research counters conventional wisdom in finding evidence that black women may be received in leadership positions on par with white male colleagues and more readily than their black male or white female peers. [Read about these findings and related work from Columbia Business School faculty members mentioned here in this issue of Ideas at Work.]

One positive note in the WECNY report shows evidence that in some industries, there is a sizable representation of women on boards of directors and in top executive positions. In three industries (food and drink, retail, and consumer products), more than 25 percent of board directors were women. In two industries (chemicals and pharmaceuticals, and food and drink), at least a quarter of the top executive positions were held by women. One explanation for this remarkable level of representation is that industries such as retail and consumer products have a strong female consumer base, and those companies recognize the business case for having a diversified board and executive suite. My colleague Professor Ernesto Reuben has new work showing that women who perform as well as or better than their male colleagues are less likely to be selected for leadership roles, which suggests that firms may not be allocating their human capital efficiently. One challenge, then, is to help companies understand the business case for parity.

Some countries, such as Norway, have legislated steep quotas for female representation on corporate boards. A quota could improve the opinions that male decision-makers have regarding the competence of women and the key role that they can play in shaping corporate policy. Quotas could also create a pool of women who have board experience and who then might be tapped for future roles on boards. But a 40 percent quota like the one Norway instituted is unlikely to be received favorably in the United States. Acknowledging this, my colleague, Professor Bruce Kogut, uses network science to model smaller quotas, finding that quotas in the 10 to 20 percent range could produce permanent, significant changes in board composition over a relatively short time.

Clearly, the reasons that women have not achieved parity at the highest levels are deep-rooted, complex, and nuanced. With this in mind, it is more important than ever that we dig into and sort out the whys to surface insights that will bring women into leadership roles now, and for years to come.

Ann Bartel is the Merrill Lynch Professor of Workforce Transformation and chair of the economics subdivision in the Finance and Economics Division at Columbia Business School.

Ann Bartel

Professor Bartel is the Merrill Lynch Professor of Workforce Transformation at Columbia Business School and the Director of Columbia Business School's Workforce Transformation Initiative. She is an expert in the fields of labor economics and human resource management and has published numerous articles on employee training, human capital investments, job mobility, and the impact of technological change on productivity, worker skills, and outsourcing decisions. Bartel...

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