Professor of Finance
During Wal-Mart’s 1987 annual shareholders meeting, founder and CEO Sam Walton announced that the company had a “strong-willed young lady on the board now who has already told the board it should do more to ensure the advancement of women.” Indeed, according to The New York Times, by her third board meeting this so-called strong-willed lady had announced “that you can expect me to push on issues for women.” That woman was Hillary Rodham Clinton.
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Though Clinton’s views on female advancement are well-known, a woman does not need to be a prominent politician to extend a helping hand to fellow women. According to research published last year in the journal American Economic Review by David Matsa, an assistant professor of finance at the Kellogg School of Management, women helping women is an integral part of attaining access to upper echelons of the corporate ladder.
The idea is that current top executives and corporate directors—most of whom are male—may tacitly discriminate against women or assume that a female candidate does not possess stereotypically “male” personality traits useful for holding executive positions, like being assertive and highly competitive. But if a woman finds her way onto the corporate board responsible for hiring CEOs and top executives, she can and frequently does turn these tables.
“Women who sit at the boardroom table are in a unique position to propel female colleagues to the highest levels of management,” Matsa says. “This then, in turn, paves the way for other women to gain access to higher positions in the company.”
Leveling the Playing Field
Today, women account for nearly half of the nation’s workforce, yet they hold a meager 6 percent of corporate CEO and executive positions. “That says to us that, as much as we hear about breaking through the glass ceiling, there’s still much to be done,” Matsa says.
He and Amalia Miller, an associate professor at the University of Virginia, decided to analyze the dynamics of female representation on corporate boards and how the presence of women may affect the gender composition of a company’s top management. Though supply-side factors—such as a woman’s choice to steer away from a stressful job or career interruptions due to maternity leave—may influence women’s representation in corporate leadership roles, Matsa and Miller decided to focus solely on the institutional barriers that may put a “glass ceiling” in place and effectively block women’s progress to the highest corporate levels.
During the 12 years Matsa and Miller’s data encompassed, women were indeed busy chipping away at the glass ceiling.
From Standard and Poor’s ExecuComp database, they obtained data on corporate board members and the top five executives between 1997 to 2009 for 1,500 publicly traded U.S. companies, which represent about 90 percent of market capitalization in this country. They found that, although 64 percent of companies included at least one woman on their corporate board, only 24 percent had a woman among their top 5 executives.
During the 12 years Matsa and Miller’s data encompassed, women were indeed busy chipping away at the glass ceiling. Their share of board seats increased by 7.2 percentage points, or a 94 percent increase from the original levels. Top executive positions lagged slightly behind during the same time frame, gaining 2.8 percentage points, or an 86 percent increase over the initial figures. The share of companies with female CEOs increased dramatically, too, jumping nearly six-fold to 5.7 percent of companies.
To determine whether these leaps can be attributed to an increased woman-to-woman demand for female executives, Matsa and Miller tested whether female directors were more likely to hire their female counterparts for executive positions. With statistical analysis, they scrutinized how a firm’s gender composition changed over time. They controlled for confounding factors like industries that may attract more women or the chance that their results simply reflected the economy-wide trend of greater female participation in all facets of corporate leadership.
Overall, women helped women. Matsa and Miller found that a woman’s presence on the board of directors increased the chances of women gaining top executive positions, including as CEO. Likewise, women’s salaries increased under these circumstances, suggesting that female board members may be responsible for some of the convergence in the gender pay gap for top execs. These effects were especially relevant if a year’s lag was incorporated into the data; in other words, it may take a little time for female executives to step into their roles after one or more women join the board, perhaps because adjustments are costly or the positions are currently filled with other qualified candidates.
Matsa and Miller did not find the reverse situation to be true, however. The appointment of female directors was not linked to the presence of female executives. One interpretation is that the executives are not choosing who their supervisors are. The researchers did not examine the factors that enable a woman to actually gain a position on a board of directors in the first place. But whatever the reason, Matsa says, “once they have that power, when interested they can help others achieve high positions as well.”
The researchers also did not examine the women’s motivation for helping to accelerate their female colleagues’ careers, but Matsa guesses it might be that women are less biased against other women, or perhaps that woman are actually working harder to try and find female candidates for filling executive positions.
Corporate Culture in Flux?
Matsa and Miller’s study only begins to tease out a few of the intricacies that influence how and why women do or do not gain top-level corporate positions. One thing is certain, though: we are moving toward gender equality, Matsa says. For now, women may be other women’s best advocates, but over time both market and regulatory factors will likely push this trend to continue and become more pronounced in the corporate workplace. “As women take greater leadership roles on boards and in executive positions, I think their qualifications will continue to be recognized,” Matsa says.
Compared to Europe, women in the United States and the United Kingdom have to wait a while before they can expect the law to help them out. Norway, for example, passed the first mandatory quota (PDF) in 2006 that requires all corporate boards of publicly traded companies to include at least 40 percent female representation. The European Commission justice minister is in favor of such blanket changes for the entire European Union, too. For now, the United States is far from imposing mandatory rules governing women’s corporate presence, but it is encouraging voluntary initiatives to try and increase women’s representation. Matsa and Miller are currently working on an analysis of results of Norway’s quota.
Though U.S. legislation lags, things are looking good in other areas. Already, women are better represented in universities than men. The percentage of women obtaining MBAs has risen dramatically over the past 20 years, too. The corporate world is one of the last vestiges of a once male-dominated society; it has lagged behind growing equality in the labor force. As more and more women gain access to board and executive positions, they will serve as mentors and advocates for women in lower positions, creating a snowball effect of better opportunities for female leadership and future management roles. Once these changes are finally realized, how the psyche of the corporate world will evolve is yet to be seen.
“I think this paper is looking at the beginning of the trend,” Matsa says. “The next step will be to understand how these businesses and industries develop once women play a greater role at the top.”
Related reading on Kellogg Insight
Professor of Finance
Rachel Nuwer is a science journalist based in Brooklyn, New York.
Matsa, David A. and Amalia Miller. 2011. “Chipping Away at the Glass Ceiling: Gender Spillovers in Corporate Leadership.” American Economic Review. 101(3): 635-639.
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