In recent years, women have been making their way in ever-increasing numbers to the uppermost rungs of the corporate ladder, ascending to leadership positions once occupied almost exclusively by men. Women now hold more than 15 percent of corporate officer positions and board seats in Fortune 500 companies, up from about 9 percent of each 15 years ago, and 3 percent of CEO spots, up from one-fifth of one percent. With more and more women earning business degrees—over a third of MBAs awarded in the United States in 2010 went to women—that trend is likely not only to continue, but to accelerate.
All of this got David Matsa, an assistant professor of finance at the Kellogg School of Management, wondering: will women at the top of the corporate world be different sorts of leaders than men are? And will those differences have any impact on the businesses they run?
Earlier work in social psychology and management had found that men and women do indeed have disparate management styles, with women tending to interact and communicate with their subordinates differently than men. But, Matsa says, “managerial style also has another meaning for economists.” Rather than look at how female CEOs and board members might act day to day, he was interested in what sort of larger strategic actions they might take and how those actions would shape their companies. When he looked at previous work in economics, he again saw differences between the genders, but little of the research examined leadership. Many of the studies were controlled experiments with the general population rather than businesspeople, comparing how male and female college students completed an economic game.
“For all the patterns seen in those studies, it’s not clear if they’d be the same among people who rise to become corporate leaders, because corporate leadership is highly selective,” Matsa says. “A lot of the stereotypical leadership traits are traits that are associated with men.” In other words, women who have made it to the top of the corporate world might behave differently than undergrads in a lab.
So Matsa and Amalia Miller, an associate professor at the University of Virginia, looked to a real-world example. In 2006, Norway adopted a quota mandating that all publicly listed companies in the country had to hire more female board members; by two years later, the companies’ boards of directors had to be 40 percent female.
Matsa and Miller examined how this marked, sudden increase in female leadership had impacted Norway’s listed corporations. Using accounting information for Nordic companies from 1999 to 2009, they found 104 Norwegian firms affected by the quota and matched them to unlisted Norwegian firms, as well as listed and unlisted firms in other Nordic countries, for comparison. These were companies similar in size, industry, profits, and so on, but untouched by the mandate to hire more female board members.
In most ways, Matsa and Miller found, the quota had no effect on firms; revenues, most costs, and rates of mergers and acquisitions all stayed about the same. The costs were higher in one area, however. “We saw that labor costs were higher,” Matsa says, “but it didn’t seem like it was coming from higher wages as much as it was coming from higher relative employment.” Companies impacted by the quota were not laying off workers as often as companies unaffected by the new law.
Since the law forced otherwise similar companies to hire women in leadership roles at a given point in time, it let the researchers do something rare for an observational study: draw a fairly strong line between cause and effect. “It’s clearer there that it’s not something from the business environment that’s leading them to have women in the leadership of the firm” and causing the workforce differences as well, Matsa says. Instead, the quota changed only one thing about the firms, the proportion of women on their boards—and that changed how often the firms laid off workers.
While the data cannot say definitively why this is, Matsa and Miller suggest two possible reasons. Female leaders may have different values relating to the workforce compared with men in the same position. For example, an earlier study of Swedish corporate board members found that women placed a higher premium on what are known as self-transcendent values, things like benevolence and universalism, and less on self-enhancement values, like achievement and power, than their male colleagues. These differences might make leaders more sensitive to the needs of their workers, and less likely to lay them off even when demand is low.
On the other hand, Matsa and Miller point out, female leaders may simply be retaining their workers because it can be a sound long-term economic strategy. “Layoffs save money in the short run but can potentially be costly in the long run,” Matsa says. Hiring and training a new workforce is a large expense that can be avoided by keeping the workforce you already have.
Matsa and Miller also found that the differences in layoff rates after the quota was implemented could not be explained by the relative youth or inexperience of the new female directors. The average age and experience of boards was stable overall following the quota, and the relative decline in layoffs happened at firms whose boards were more experienced and older than average.
Gender in the Boardroom
In a follow-up study, Matsa and Miller looked at workforce reductions in the United States during the recent recession. Instead of gauging gender balance in the boardroom, as they had in Norway, the researchers looked at the gender of the majority owner of privately held companies. They investigated whether female-owned businesses in the United States would, like businesses with more female board members in Norway, lay off fewer workers than their male-run counterparts.
Matsa and Miller compared 2006–2009 data for more than 2,000 privately owned, female-run American companies and male-owned businesses that were similar in industry, size, and profitability. Again, they found that companies led by women were far less likely to reduce employment, making 25 percent fewer layoffs than firms run by men. The gender difference persisted even after accounting for the firms’ financial conditions and the owners’ages, experience, education, and financial wealth.
This finding “helps to confirm that the Norway results don’t seem to be specific to the quota,” but rather something about how female leaders run their businesses, Matsa says. “Even in a setting without a quota, you still see a similar pattern.” It is likely, he says, that the same pattern holds across a variety of corporate settings.
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