Women On Top: Getting More Females in Higher Positions

Updated: Dec 21, 2019

As of December 2019, only 5.2% (26) of CEO positions at S&P 500 companies were held by women and only 24% of S&P 500 directors are female – an average of 2.6 females per board. Individual C-suite roles see less than 20% representation (except chief human resources officer, a department traditionally regarded as female) across all industries. This lack of female representation still occurs despite a Pew Research Center survey, which found that most Americans (59%) would like to see more women in top executive positions in business.

One of the major factors that has led to a lack of females in C-suite roles is that most CEOs are promoted from other C-suite positions. A 2018 study conducted by Christ Kolder, found that 40% of CEOs at the time were promoted from the COO role. The low representation of females at the C-Suite level (especially the second highest company roles such as COO and CFO which females only make up 8 and 10% respectively) plays a pivotal role in the lack of female CEOs. According to a report by Spencer Stuart, companies with a female CEO have more female board directors than those led by men (33% versus only 23.5%, respectively). Additionally, in an experiment conducted by the Harvard Business School, researchers found that female employers were much more likely to hire women than male employers were. According to the Women in the Workplace 2019 study published by LeanIn.org and McKinsey & Company, more women are earning bachelor’s degrees than men, but are still less likely to be hired into entry-level positions. Women are also less likely to be hired or promoted in managerial roles. Overall, this study concluded that only 72 women are promoted to manager for every 100 men. This disparity is more pronounced for women of color, where only 58 Black women are promoted for every 100 men and only 68 Latina women are promoted for every 100 men.

Among the multitude of issues that women face upon entering the workforce, sexual harassment remains one of the most pervasive. According to the same Women in the Workplace 2019 study, 41% of women surveyed experienced sexual harassment at some point in their career. Additionally, 73% of women were subjected to microaggressions such as demeaning comments, having to prove their value more or being mistaken for having a title below theirs. According to Catalyst, minority women often pay an “emotional tax” (feeling on guard because of the expectation of bias, exclusion or discrimination), which causes many to leave their companies. Furthermore, according to an Academy of Management study, white male managers react poorly to the appointment of a female or minority CEO. They are less likely to be helpful to colleagues especially those who are minorities. Overall, the path for females to succeed is not easy.

The lack of female representation in top roles has had profound impacts throughout all industries. For example, a study conducted by the Harvard Business Review concluded that for profitable firms, increasing female representation in leadership roles from 0% to 30% led to a 15% increase in net revenue margin. Additionally, a study conducted by McKinsey found a positive correlation between gender diversity on executive teams and two measures of financial performance. Companies in the top-quartile of executive-level gender diversity worldwide were 21% more likely to outperform their fourth-quartile industry peers on EBIT (Earnings Before Interest Taxes and Amortization) margin and 27% more likely to outperform them on longer-term value creation as measured by economic-profit margin. Similarly, a MSCI research study for 2011-2016 found that US companies that had a minimum of three female board members had a 10% increase in median gains in ROE (Return to Equity) and a 37% increase in EPS (Earnings Per Share). Conversely, companies with zero female board members experienced a 1% decrease in ROE and an 8% decrease in EPS.

Globally, there is also evidence that increasing female presence in companies leads to positive outcomes. An IMF study conducted on European companies concluded there was a positive correlation between ROA (Return on Assets) and the number of women in senior leadership roles. In China, a study of 2,000 companies published in the Journal of Corporate Finance found that companies with greater gender diversity on boards had an increased ROA and ROS (Return on Sales). Finally, a Peterson Institute for International Economics study of 21,980 firms in 91 countries found that having women in C-suite positions was positively correlated with net margins.

Overall, there are several measures that can be taken to increase the number of females in leadership roles. For example, legislation such as SB-826 in California – where companies would be required to have at least 25% (in some cases more) female representation – can be enacted to mandate the number of board members. Paradigm for Parity created a list of 5 best practices for companies to achieve gender parity that include: (1) address subtle or unconscious bias, (2) establish clear diversity targets and measure progress towards goals, (3) focus on key roles and redefine the path to leadership, (4) establish mentorship and sponsorship programs, and (5) provide flexibility and support towards work-life balance. Establishing clear diversity targets is crucial because according to the Women in The Workplace report, only 38% of corporations have gender representation targets. Moreover, in order to create a more gender diverse work environment, there needs to some accountability. According to the same report only 42% of companies hold senior leadership responsible for making progress towards gender equality. This percentage diminishes with holding managers and directors accountable. Finally, only 12% of companies share their gender diversity metrics with employees. This makes it extremely difficult to address subtle or unconscious bias because 88% of employees are unaware of these metrics and do not see a major commitment to change.

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