Why 5 Percent Remains a Glass Ceiling for Female CEOs

(Bloomberg) -- When the late Katharine Graham became chief executive officer of the Washington Post Co. in 1972, she was the first woman to run one of the 500 largest U.S. companies by revenue. In the 46 years since, only 67 other women have had that distinction. Almost every large U.S. company has publicly stated its commitment to gender diversity, and women make up nearly half the U.S. workforce. But women struggle to retain even 5 percent of the CEO jobs at the biggest companies.

1. What do the numbers show?

Among Fortune 500 companies, the number of female CEOs peaked at 31 as of June 2017 before slipping to 24 -- 4.8 percent of the total -- this May. Among members of the Standard & Poor’s 500 Index, an overlapping list that includes only public companies, 5 percent had women as CEOs at the start of this year, according to Catalyst Inc.

Why 5 Percent Remains a Glass Ceiling for Female CEOs

2. Who are the women who broke through?

The list of women named CEO of a top-500 U.S. company includes such well-known names as Ginni Rometty at IBM; Mary Barra of General Motors Corp., the first women to lead a major automaker; Indra Nooyi, who is stepping down as PepsiCo Inc. CEO; and Ursula Burns, whose eight years at the helm of Xerox Corp. made her the first African-American woman to lead a Fortune 500 company.

3. Why have there been so few female CEOs?

There’s no end of possible reasons, ranging from outright sexism to the lingering effect of old-boy networks to a lack (real or perceived) of qualified female candidates. What’s clear is that the issue is a systemic one, developing long before the moment when a corporate board chooses a new leader. Almost seven in 10 CEOs at S&P 500 companies last year had been groomed for the job internally, and corporations tend to go with executives who have run operating units -- a level that relatively few women reach.

4. What’s keeping women from leading operating units?

One study found that some men think they’re protecting women from the rigors of assignments that require travel and time away from their families. Women leaders are more common in such units as human resources, legal and marketing, but companies tend not to choose their CEOs from those divisions. (“Middle management is where diversity goes to die,” Sallie Krawcheck, once one of Wall Street’s highest-ranking female executives, said on a recent episode of Bloomberg’s The Pay Check podcast.) Studies show that, once hired, women fall behind in promotions and pay. They earn about 90 percent of the wages of men by the time they’re 32, and 82 percent by age 40. In between is when many women leave the workforce to have children, suggesting they pay a price for motherhood.

5. Will recent progress prove lasting?

It doesn’t look that way. Most of the current female CEOs in the S&P 500 have a man serving as president or chief operating officer, the most likely sources for successors. Among the 100 largest U.S. companies in 2017, the only executive-suite job in which women were a majority was as head of human resources, recruiting firm Russell Reynolds Associates found.

6. What can be done?

More companies are taking steps to elevate junior women executives to important roles, where they can gain leadership experience; to balance the child-rearing load by adding paternity leave for men; and to offer re-training programs to encourage women to return to the workforce. Women made up 36 of new independent directors at large companies last year, the most ever, but still accounted for just 22 percent of corporate boards, recruiting firm Spencer Stuart reported. Investment-management companies such as State Street Corp. and BlackRock Inc. are starting to vote against directors at companies who aren’t doing enough to improve diversity. Some advocate that companies compensate CEOs on how well they improve diversity in the executive ranks -- or penalize them for lack of progress.

7. Does this really matter?

Consulting firm McKinsey & Co. found that companies with the highest levels of diversity had profit margins 21 percent higher than those with little diversity, based on 2017 data. A Credit Suisse analysis of 3,400 companies worldwide in 2016 similarly determined that companies with more diverse management had higher returns on equity, dividends and market values, compared with less-diverse companies. On the other hand, companies with female CEOs were 50 percent more likely to be targeted by activists and about 60 percent more likely to be targeted by multiple activists in what are sometimes called wolf-pack attacks, according to research on 3,026 large U.S. companies between 1996 and 2013. One study found that woman-led companies are more likely to see a decline in their company’s stock, even though there’s no difference in profitability.

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