In 2017, only 5.4 percent of Fortune 500 companies had female CEOs. Obviously, that is a disproportionately low number, but it also happens to be an all-time high in the United States. Now, a new study from Florida State University has also found that women CEOs in America are paid less, have shorter tenures, and their companies are discriminated against in the stock market – even when the company is as profitable as those run by men.
FSU professors Michael Holmes and Gang Wang – both business management experts – put together a massive study, spanning over two years, to assess the influence of gender on CEOs’ careers. They conducted a meta-analysis to examine the entire body of research on this topic over the last few decades, including 158 previous studies analyzing gender, companies’ hiring choices, and the impact of those decisions.
The research project, published in the journal Organizational Behavior and Human Decision Processes, identifies a variety of factors that hinder female CEOs and CEO candidates among corporate boards, managers, stock market investors, and across American culture. The study’s authors grouped these factors into two basic marketplace forces: demand-side and supply-side influences that combine to detract from a woman’s ability to land a CEO job.
Demand-side factors reduce demand for female CEOs by limiting the willingness of companies to hire women for the job. The hiring process for CEOs can be influenced by gender-role stereotypes, as the perceived traits of a good leader – like aggressiveness and risk-taking – are often seen as masculine traits. “Because of that bias, men have advantages obtaining and succeeding in leadership positions, while women leaders are more likely to be disliked and viewed as socially inept, due to the perceived role incongruity,” the authors note.
On the supply side, more women choose to leave the workplace for a number of reasons, including family changes, lack of career advancement, or even outright discrimination. The study also reports a bigger societal influence on hiring CEOs, where males are taught from childhood to display traits associated with leadership that are usually less common for women. “Females are more likely socialized to care for the home or be nurturing,” says Holmes. “Men start to develop characteristics that might help them become a CEO early in childhood, whereas fewer women do. That reduces the supply of female candidates for CEO jobs.”
The researchers also found a significant bias in the stock market against women CEOs. Using accounting metrics to compare companies with similar financial results, they found that firms run by women CEOs had worse stock performance than those run by men.
“Women have come a long way in the workforce in terms of their overall numbers and acceptance, but when it comes to stock market investors evaluating a CEO and a company that they don’t know, I think investors may subconsciously discount that firm because the leader is female versus male,” Holmes says. “It seems when investors take an overall look at firms, biases creep in, and people may not even be aware of them.”
With these findings, the researchers believe the next step is for studies to find ways to reduce biases from both demand and supply-side influences. They currently suggest that young women pursue promotions early and often, as research shows that women who become CEOs are usually younger with fewer years of experience than men.
“These women have earned their place at the top,” says Holmes. “But the data shows things are different for women – the workforce does not offer a level playing field. I hope when people read the research, they have some ‘aha’ moments with the findings, as well as the explanations. By showing these firms perform the same as companies led by male CEOs, let’s get beyond the idea that women can’t be good leaders. Clearly, they are good leaders. They often just aren’t rewarded equally.”