From New York to Nairobi: Why few women get executive jobs

Here is a puzzle. If the bulk of studies show that women are a net plus to corporate America, why are they still a small minority on Wall Street and in the executive suite?

The dearth of women in the top echelons is well documented. Women make up only 16 per cent of directors at Fortune 500 companies, 4 per cent of chief executives at Standard & Poor’s 500 companies and 10 per cent of chief financial officers at S.& P. 500 companies.

On Wall Street a small, but increasing, number of traders and executives are women (although the numbers are even worse at hedge funds, where only 3 per cent of assets are managed by women).

The figures stand in contrast to the fact that more than 57 per cent of bachelor’s degrees are awarded to women. And in 2012, 43 per cent of people who took the business school admissions test were women, according to the Graduate Management Admission Council, which administers the primary test.

This is what is puzzling: various studies illustrate women’s great value on Wall Street and as executives, yet their numbers remain small.

The public benefits when women succeed in finance. When it comes to investment strategies, women are more conservative than men and more risk averse.

They also tend to invest for the longer term, a trait that can result in less-volatile returns. And recent evidence suggests that women may do better than men in short-term investing.

A study of hedge funds run by women found that they outperform funds run by men. Another study of retail investors found that men traded 45 per cent more than women in their own accounts, but earned 2.65 per cent less.

Style of leadership

Outside the investing and trading sphere, there are also scores of studies about how women enhance the organisational environment. Women have been found to be more altruistic.

There is a female style of corporate leadership, which involves more listening and cooperation, some studies indicate. And a paper that looked at companies in the S&P 1,500 index found that corporations led by women performed better.

Many of the more recent studies have focused on the composition of corporate boards and whether having female representation increases a company’s value. Many of these studies are based on the Norway experiment, where at least 40 per cent of every corporation’s board must be composed of women.

Some found that adding women to boards in Norway decreased corporate value and profitability. However, this decline may be explained by the fact that the men were replaced by less experienced women, the studies found.

While some studies may conflict with others, in aggregate, these reports provide evidence that women have the potential to add significant value to a company.

Certainly, some scholars and advocates for women do not consider the study of differences between men and women legitimate. To them, such research is insulting because it sets up the idea that women are actually different and perhaps require different treatment.

This is where the conflict lies in seeking a remedy to the problem. Lately, several books and essays have sought to address the reasons for the small percentages of women in corporate leadership. Depending on which rationale you believe, the remedy differs.

The first explanation is simple sex discrimination. Women entering the work force are met with overt hostility. In some cases, benevolent attitudes have been found to be patronising and can do as much harm as outright discrimination.

More generally, hostility is not required for discrimination to exist. In other words, stereotypes can end up creating different or lower expectations for women in the absence of hostility. And another strand of literature argues that there is not hostility toward women so much as a preference for men.

Evidence for each of these explanations can be found in the repeated studies that have concluded that women on Wall Street and in corporate America are paid less than men for similar work.

The second explanation is more complex, and states that the current male-driven culture does not allow women to succeed. Women’s values and approaches are different, and when entering the workforce, women find that the male culture is not to their taste or are driven off. Those women who succeed adapt to the male culture. In other words, women need to become like men to become corporate executives.

Another issue at the forefront involves childcare. In large part, women still effectively function as the primary caretakers of their children, and many commentators have described the struggle for “work-life balance.” This is true because the need to care for children is often greatest when women are in their 30s and 40s, a period that is the prime time of their careers.

Demographic changes, however, may help change the equation. The median age of a chief executive of an S&P 500 company is 55, while the average age of a director is 62. As more women enter the work force, they will gradually come to parity and perhaps even take over.

It is here where we arrive at the thesis put forth by Facebook’s chief operating officer, Sheryl Sandberg. In her new book, Lean In, she seems to side with the explanation that a male-driven culture is at the root of the problem.
Sandberg urges women to lean in and become as assertive as men in pushing forward their careers.

Her chief foil these days is Anne-Marie Slaughter, a professor at Princeton, who left a high-powered post in the State Department.

Professor Slaughter’s main concerns are the notion that the needs of women, childcare and time with children are not being accommodated by the workplace.

Sandberg and Slaughter are not the only ones examining the issue of women leaders. Other authors and commentators have joined the debate with books like Nice Girls Don’t Get the Corner Office and The Feminine Mistake: Are We Giving Up Too Much?

But the question boils down to how to address this imbalance in the number of women in leadership positions in corporate America and on Wall Street. Do we address overt discrimination with affirmative action or quotas as Europe has?

Or is the answer to open space for women to spend time with their children and have career breaks? Or do women really have to become like men to succeed? And, again, the response differs, depending on what you see as the cause of the problem.

Tough options

For advocates of sex equality, there is reason for optimism. The rising numbers of women in the workplace will inevitably continue to chip away at the disadvantages that women face. And if women really do en masse change cultures and bring separate characteristics to bear, it could transform the way that Wall Street does business.

But it is clear that given today’s low numbers, Wall Street has its work cut out for it.

Steven M. Davidoff, a professor at the Michael E. Moritz College of Law at Ohio State University, is the author of “Gods at War: Shotgun Takeovers, Government by Deal and the Private Equity Implosion.”