women in management

Is gender equality good for business?

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Photo Credit: AP Photo / Richard Drew

Is gender equality good for business?

Generally, attempts to answer this question focus on measuring the financial performance, and stock-market performance of companies led by women CEOs or with female directors.

Last week, for example, market index provider MSCI released a study showing that companies with at least 3 board directors or a higher percentage of women on their boards (compared to their country’s average) generated 36.4% higher returns for their shareholders than companies where women were not as well-represented. This analysis was based on a review of 4,000 global companies since 2009.

We’re not surprised to see gender equality correlated with financial success. Past studies (such as this one from Credit Suisse, and another from Catalyst) have shown similar relationships between gender diversity in the senior leadership and financial out-performance.

So if gender equality means financial success, why aren’t there more companies jumping on the bandwagon? We’d venture to guess that part of the reason is simply that the studies show correlation — not causation. Financial performance is easy to measure but it’s a tricky thing to understand, much less find a “formula” for. Many variables go into what makes some companies more successful than others — as mountains of business books demonstrate.

Another reason may simply be that female representation at the upper echelon of a company is not exactly the same thing as “gender equality” at that company. To use an analogy, having an African-American President of the United States doesn’t mean there is racial equality throughout America.

Don’t get us wrong — It’s certainly important to measure gender equality by tracking the number of companies with female CEOs or directors. However, if you believe a company’s financial success depends on having a culture that welcomes and fosters diversity of thought and opinion, a culture of gender equality throughout all levels of an organization is probably equally important. After all, many critical business decisions are made every day that never make it up to review of the C-suite or director level. The way a digital product is designed, discussions over the way a car’s safety feature is tested, how a new campaign for children’s toys is marketed to households are all decisions initially made at the lower-to-mid levels of a company where diversity and representation of thought are critical.

That’s why we try to measure what all women at an employer think. We ask every woman in the Fairygodboss community whether they think they’re treated fairly and equally to men at work. In analyzing thousands of employee reviews, we’ve found that when women report there is gender equality in their workplace, they also report overall job satisfaction. Since job satisfaction is one predictor of how likely an employee is to remain at an employer — it’s an important measure of employee turn-over and recruitment costs.

In other words, gender equality is certainly good for business in terms of being able to recruit and retain employee talent. Stay tuned for more of our findings about gender equality in the workplace!

Fairygodboss is committed to helping women in the workplace. 

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More CEOs Named John or David than all #womenCEOs in S&P1500

Last week we wrote about the sad but revealing fact that there are more directors of S&P1500 companies named John, Robert, William or James than all the women directors for those companies, taken together.

Now, the NYTimes has reported on another name analysis in corporate leadership.  Their finding?  There are more CEOs named “John” or “David” than all the women CEOs of those companies, taken together.  There is some good news for gender equality, though.  (And no, its not that there are at least more women CEOs than ones named “Robert”, “James”, “Michael”, or “William” in the S&P1500).  The good news is that in the political arena, things look better for women — at least for the Democrats.  In Congress, there are just as many women as men with any of these names in the Democratic Party.  That’s not the case in the GOP, where there are just as many female legislators as men named “John.”

In all seriousness though, is all this name analysis even fair?  What if there are just huge numbers of people of a certain age named “John”?  Are the numbers misleading?  According to the NYTimes, the last Census to publish first names was in 1990 and the following were the percentages of the population with these names:

  • James: 3.3%
  • John: 3.3%
  • Robert: 3.1%
  • William: 2.5%

Women comprised over 51% of the population.

So yes, in case you were wondering, the name analysis is not just light-hearted stuff.  It shows a real issue with corporate America’s leadership diversity.

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More Directors Named “John, Robert, William or James” Than All Female Directors, Together

The latest Ernst & Young study on board composition shows that if you added up the number of S&P 1500 (i.e. the companies in the Standard & Poors 1500 stock index) directors with one of those names, that number would be higher than the total number of women directors for those same 1500 companies.

Overall, the news E&Y report is actually not that bad.  They report 3 findings:

  • The bigger the board, the more likely there is a female director on it.

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  • Female directors tend to have different career backgrounds and credentials than male directors.  They are younger, are more likely to serve on multiple boards and are less likely to be CEOs.

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  • Gender diversity on boards is moving in the right direction, albeit very slowly

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Maybe there are a hugely disproportionate number of men named “James”, “Robert”, “William” or “James” in the world.  I’d bet you there are, actually.  But even if that’s the case, as E&Y’s Chief Diversity Officer put it,

“The pace of change is absolutely glacial…The idea that we can essentially pick out four common men’s names, at random, and find this shows there’s a long way to go.”

We couldn’t agree more.

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Women in Finance Are a Small Pool…Across the Pond

Last weekend, the Financial Times featured an article about women in the “City” (the name for London’s analogue to New York’s Wall Street, which was historically a square mile of London dominated by financial institutions).  A little background here: the UK tends to fall somewhere between the United States and continental Europe in terms of employee benefit policies (i.e. it tends to be more generous than the United States in terms of favorable employee protections such as maternity leave, but less generous than many European countries).  In terms of the challenges women in finance face, however, things in London look a lot like things in New York.

While the gender ratio in the overall staff of City employers is close to 50/50, top management is dominated by men (80%) and women report a macho culture that make it difficult to succeed.  This is despite the companies’ attempts to “have some of the most proactive female employment policies around.”  Unlike the U.S. banks, where to my knowledge there are no targets for female management, several institutions in the U.K. such as Lloyds Bank, the Bank of England and Barclays are cited as having goals for female management numbers (with Barclays making diversity one of 8 factors upon which bonuses are based).  I find it striking that many of the top financial institutions in the U.S. similarly have very strong benefits for maternity leave, childcare, not to mention diversity programs and training.  And yet, these places still purportedly feel very difficult for women both in London and New York.  The reasons cited for the dismal female management numbers are similar to the ones you hear often in the U.S.: grueling hours, the conflicts of motherhood, and the lack of female role models.  Another reason is described in the article by a 30-something year old woman who left a career at Goldman Sachs for private equity.  What she says is interesting because I’ve rarely heard it put this way in print, but find it resonates with what I’ve personally observed:

“Many women in finance didn’t always envision a career in the industry — they were educated or convinced into it…Banks then compound this by actively recruiting female hyper-achievers, who see a job in the industry as a stereotype to beat. They often excel for two to four years, then get slightly bored and want a new challenge.”

In other words, its probably true that certain high-achieving women also have many career options and choose to leave for reasons that are personal.

Ultimately, while the article has no conclusion, it provides a great overview of the state of women in finance, and covers HR benefits, policies and catalogues what certain companies are doing to address issues such as flexible working, maternity/paternity leave, and childcare.  Its a great read in comparative issues, and may even foreshadow certain things to come in the U.S.

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23 on the “Zero List”

Catalyst is a non-profit organization I’ve written about before.  Every year they publish a lot of interesting research regarding women and leadership but I only heard about their aptly named “zero list” recently.  The zero list is a list of Fortune 500 companies with “zero” women on boards.  Today, Fortune published the names of the Fortune 5oo Companies that currently have no female directors:

  • Caesar’s Entertainment
  • Charter Communications
  • Chesapeake Energy
  • CHS
  • Core Mark Holding Company
  • Discovery Communications
  • EMCOR Group
  • Energy Transfer Equity LP
  • Fidelity National Financial
  • Global Partners LP
  • Harbinger Group Inc
  • Holly Frontier Corporation
  • Icahn Enterprises
  • INTL FCStone
  • Joy Global
  • Land O’Lakes
  • MRC Global
  • Navistar International
  • Peter Kiewet Sons
  • Precision Castparts
  • Seaboard
  • Sonic Automotive
  • World Fuel Services

Compared to last year, when 50 companies (10% of the Fortune 500) were on the list, this represents progress.  But I’m beginning to wonder whether these companies are motivated to change, and whether employees and prospective recruits care.  If they don’t, then it may be a longer slog to changing the numbers.

Let us know what you think.  If this data is important to you, we will consider adding it to Fairygodboss.  If it doesn’t matter at all, that will be important for us to know, too.

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Quotas Gone Wrong

Whatever you think of quotas, this is surely one way NOT to do it.

Last year (2013), India passed a law requiring all publicly listed companies to appoint at least one female director by October 2014.  That means there’s one month left for companies to comply and one reporter described the situation as “Indian Companies Need to Find Women Directors to Fill 750 Positions in 30 Days“.  Given so little progress against a hard deadline, its pretty obvious that companies haven’t taken this requirement very seriously.  A closer look explains why.

The penalty for not following the rule is a financial fine — but it’s only $8,000 USD!  Many publicly listed companies in India have relatively low sales turnover compared to American publicly listed companies but the fine is so pithy its not even a gentle slap on the wrist.  To make matters worse, one perverse outcome is that some companies have appointed non-independent, female directors (e.g. relatives, wives, sisters, etc) of the CEO or Chairman of the company.  Although they’re not alone, the best known example is Reliance Industries, one of India’s largest conglomerates which is owned by India’s richest man.  In June, Reliance appointed its CEO-owner’s wife to the Board, despite the fact that she has no obvious qualifying credentials.  Of course, there are some Indian companies that areally are trying to comply with the spirit of the law and some even had female directors before the law was passed.  And some headhunters say that the law has caused their client companies to more seriously consider diversity and look for qualified female directors.

The issue with quotas is that while they may appear well-intentioned and may even be more thoughtfully executed than in the India example, there is always a serious risk something goes wrong in the implementation.  Quotas also have very serious potential / real negative consequences: they can make the women who deserve and earn their seats feel like they are not equal to the other directors, or perpetuate harmful biases that hurt other women.  In the case of Norway, which adopted a 40% female director quota in 2003, research after a decade of implementation suggests that there was zero “trickle down effect” helpful to women outside the headline board membership figures either within those companies, or in other business contexts.

There are alternatives to simple, outright quotas of the type that India and Norway have adopted.  For example, some companies have quotas for director or senior management short-lists.  However, the final selection will not be based on quotas.  There are also organizations such as the 30 Percent Club in the UK that aspires to fill company boards so they are 30% female, but support their goal via advocacy and corporate education rather than quotas.  Collectively, those who manage companies can also simply ask and expect that individuals and their organizations make an effort.  For example, Katty Kay and Claire Shipman interviewed Christine LaGarde for their book, The Confidence Code and recount her very practical method for supporting female leadership:

She got so fed up of men coming up to her and saying, you know we’d love to have more women at the top of companies, or we’d love to have more women running things, but we just can’t find the good candidates. This annoyed her so much that she wrote down a list of 10 really good women, qualified women, and put it in her purse. Every time a man came up to her and said, “It’s such a shame we can’t find a qualified woman,” out would come the list.

 

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What Executive Recruiters Can Tell Us About Female CEOs and Directors

Today I read (yet another) article trying to explain why there are so few female CEOs.  The short answer: there isn’t a strong pipeline of women in “line” or “operational” roles, which typically precede winning the CEO job.  In other words, women achieve senior leadership in roles such as HR, legal, PR, or finance where they haven’t been responsible for a P&L.  Therefore, they hit a management “ceiling” b/c CEO candidates tend to come from the head of business units, sales, or operational roles.  

This pipeline or “grooming” issue has been noted in most serious studies of women in corporate senior leadership so I didn’t think the article said anything new until I read the following quote:

“I don’t think there is a bias, a lot of companies are specifically looking for women to put into these jobs,” said Wood, who has helped place more than 200 CEOs and directors. “If you haven’t been thoughtful about evolving and developing your talent, you may find that you narrow your choices beyond what you should if you had more actively managed people getting new assignments.”  

The speaker in question is John Wood, none other than the vice chairman of a major executive recruitment firm, Heidrick & Struggles.  Presumably his loyalties are to his clients so I was surprised at his comment because most companies don’t make public statements about how they are looking for a CEO of X gender or Y race.  In fact, companies do the exact opposite and say generic things about finding the “best” candidate or one that maximizes shareholder value.  In fact, I cannot think that a large company would ever say anything so explicit about finding a candidate of a particular gender.  But it did make me wonder: what’s said behind closed doors?  It made me think about all the companies who might be dealing with an image problem and what they say about the need for diversity after a scandal.  For example, American Apparel’s Board recently appointed its first female directors after ousting a male CEO who’d been embroiled in sexual harassment allegations.  Maybe executive search firms whose clients tell them they are “specifically looking for women” in fact, have a lot of experience with bias that they’re explicitly trying to counteract by hiring people of certain types.  

This is only speculation on my part, but I think Mr. Wood’s comment is actually a lot more revealing than he intended and I would be fascinated to hear more from executive recruiters about the candidates that companies seek for their CEOs and directors.  It would be especially interesting to understand why a company would be “specifically looking for women.”  

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