Underpayment and greater risk for dismissal of female CEOs

It's been said a lot that there are too few female CEOs, but sometimes women have good reasons not to become a CEO. Because there is still some evidence that female CEOs are underpaid and the chances of getting fired are much higher than for male CEOs.

Female and male CEOs have very similar backgrounds. They have almost the same age, life in the same area as the headquarters of the company, have few international experience and reached rarely the combi-function CEO and president. But there are still some differences between the two genders. The biggest difference is the remuneration. Female CEOs are still underpaid compared to their male colleagues. This gap still remains, although it is getting smaller slowly. Female CEOs only earned 80 cent per dollar compared to the male CEOs, this is evidenced out of a research of the American Ministry of Labour. A wage survey of The Wall Street Journal did research to the remuneration of 300 CEOs of listed companies. The result was that only 8 out of the 14 female CEOs had a wage above the median. The wage of the 6 other female CEOs was below the median.

The reason of this gap is due to a negotiation gap between women and men. Women are afraid to ask what they want, “Nice girls don’t negotiate”. This gender bias will also be there in the negotiation phase and this creates some psychological barriers. There is a social stigma against women who ask for more. Women are expected to be nice, sweet and kind. But when they ask for more remuneration or better circumstances in the negotiation phase, they will be seen as the unfriendly and rude person.

Next to the fact of the underpayment of the female CEOs, there are still more chances of getting fired. Because women get riskier responsibilities as a CEO and have thus more chances of failing. Studies of Europe and US show that female stick only half the time in the CEO position than men and that female CEOs have 50% more changes to get fired.

17% of the Belgian listed companies have one or more females in the board of directors, which should be 30% at the end of next year. Still, Europe wants to put the target at 40% by 2020, the magic year in which Europe hopes that everything will change. The Belgian female CEOs in the listed companies give, let’s say, a distorted picture. There are only 136 listed companies in Belgium while there are almost 90.000 firms in Belgium. It wouldn’t be bad for every company, both listed and non-listed firms, to have at least one woman in the board of directors.

Our hopes are up that there are quite some changes coming and people will pay more attention to competences, team spirit, ethical issues and sustainability. And the good news is that everybody assumes that women are better at these soft skills than men will ever be.

So, at this end, we can only hope that female CEOs will rock the world some day!

“The less important fact about me, is the fact that I am a woman.”

Determining Factors for Female Success

“Women are breaking the glass ceiling”
“The wage gap between men and women is becoming smaller”
“Inequality between men and women on the work floor is decreasing”

Yes.

But… 

The extent to which this happens depends on a lot of different factors, it seems….

First of all, the geographic area you are active in plays an important role in the inequality of women versus men. The European Union is a worse student than the Unites States. In North America, the percentage of women in a leadership role is a lot higher than in the European Union.

The sector you are active in also plays an important role in the ability to break the glass ceiling. In some sectors the wage-gap is a lot wider than in others. The aviation sector is the worst player in this unfair game. In this sector, the difference in wages between men and women amount to a whopping 33%. Unfortunately, they are not the only ones. Clothing producers for example also have a wage difference of 25% between men and women in the same function.

Luckily, there are also some sectors that have a very small wage gap. The wood industry, specialised construction projects and the manufacturing of metals for example have a wage gap of only 1 or 2%. Good news however is the fact that in most sectors, the wage gap is declining compared to some years ago. Other research shows that the accounting sector and education sectors make women feel most supported, whereas marketing, advertising and media bear higher levels of discrimination. The same research confirmed that women working in engineering and manufacturing feel that their gender has been hindering their career. 

Of course some firms are better in helping their female staff smashing the glass ceiling than others, no matter what geographic area or industry they are in. The National Association for Females Exectuives (NAFE),  is a division of working mother magazine. It is one of the largest women’s professional associations in the United States. The NAFE Top Companies for Executive Women recognizes corporations that moved women into top executive positions and made room for a culture that identifies, promotes and nurtures successful women. In the 2015 top ten companies KPMG, EY, IBM, Procter & Gamble and Marriot International Appeared. The winner was Abbot. 

Equiped with this knowledge, ambitious women can be a little more selective in the companies, places and sectors they want to work in!

Bekaert changes gender of its board

Together with their good results, Bekaert announced some rather surprising news this week. Starting from May, four out of the six independent board members, will be women. The current members, four men and one woman, will be replaced by four new women and two men.

The new board members are the British Celia Baxter (Ford, KPMG, Tate & Lyle, Bunzl), the Belgian Christophe Jacobs van Merlen (Bain Capital), the German Pamela Knapp (Deutsche Bank, Siemens), the German Martina Merz (Chassis Brakes, Robert Bosch) en the Belgians Emilie van de Walle de Ghelcke en Henri-Jean Velge. With these new members, four of the independent directors will be women. Bekaert says that the new choices are a consequence of a thorough succession planning, aiming at a broad international, and professional representation.

It is a big change of the company because a few months ago, at the end of 2015, De Standaard published a study done by Standard Ethics, where they ranked the BEL20 companies according to the number of women in the board. Standard Ethics is the first independent European Sustainability rating agency. They assign Solicited Sustainability Ratings (SSR) to companies, sovereign issuers and green bonds. At that time, Bekaert was far below in the list, with only a representation of 14,29 % of women in the board. AB Inbev and Colruyt had the same percentage of women. The only company that that did worse was Ackermans & Van Haaren (11, 11% of women).

The three companies that had the most women in their board were Engie (57,89% of women), Proximus (50 %) and Delta Lloyd (40%). Now Bekaert will be definitely in the top three of the BEL20 regarding gender diversity of the board. The table below shows the percentage of gender composition in the twenty largest Belgian companies.

Standard Ethics made a comparison between the largest companies in France, Germany, Belgium and Italy. Belgium performs both extremely well and extremely poor. Our country has the first place (Engie) in the top 10 companies regarding gender diversification, but is also in the bottom 10 companies (Ackermans & Van Haaren).

It is clear that there are still large differences between companies, even in the BEL20. But, Bekaert’s announcement this week already made a big change. They will shift from being one of the bottom BEL20 companies in board diversification, to being one of the top companies in the list. Who knows, maybe Colruyt, AB Inbev and Ackermans & Van Haaren will follow this example, and Belgium will become the leader in gender diversification at board level!

The pitfalls of female CEOs

The proportion of female CEOs is still very small, and there are quite some reasons for this. The latest Fortune 1000 list includes only 46 female CEO's. (http://www.geolounge.com/fortune-1000-companies-2014-list/).

Reasons for this have often been called the ‘glass ceiling’ or the ‘sticky floor’.

The glass ceiling refers to the resistance women encounter on their way to the top. Women who want to grow in a company are often prejudiced because of the fact that they won’t be the perfect mother/housewife. The glass ceiling is the “unbreakable” barrier that keeps women from rising to the top of the company, regardless of their qualifications or achievements.
Sticky floor refers to the fact that women who do not apply for challenging positions due to a lack of confidence, which limits their development in a company.

 In some cases women are given top positions that carry a greater risk of failure more often then men. Women are more easily promoted to top positions, especially in times of crisis, but they also have a greater risk of failing. Studies showed that women remain in their CEO position half the time compared to men. Wouldn’t you agree with them? Women are only considered the perfect fit for the CEO-position when the firm is going through hard times, so they have to ‘save’ the company and face a lot more pressure. This makes it fairly obvious why women quit this position sooner.

In my opinion, these terms of sticky floor and glass ceiling aren’t the most appropriate, we should say that it is a labyrinth for women to reach the top management.

It might take until at least 2030 before a third of all top-level positions are taken up by women.  Unfortunately, women are less likely than men to show interest in a job, since they often have the feeling that they should be approached. Otherwise they have the feeling that they are not competent for the high function. An explanation for the limited number of female top-positions can be that women are not applying for a job when they are planning to start a family in a few years.

 Quotas may be a solution, but it isn't  a perfect one. Solving the problem through the regulatory framework has often been shown as an unsuccessful approach. Quite some women oppose the idea because they don’t want to be favoured. For the moment I don’t think these quotas will make a huge difference in the amount of female managers.  It’s a pity, because this slows down the process while there are a lot of corporations out there who are engaged to grow the amount of female CEOs.

Women are more often hired for high-risk positions, because recruiters feel women have the abilities to solve a crisis or because it is less of a tragedy for women to fail.

The stereotypical image of women at the top: they are though. A man who has a tough approach is considered ambitious.

Or as the COO of Facebook said: “A little girl who is bossy is called bossy. A boy is immediately called a leader.”

Gender diversity: does it matter?

Gender representation in the board of directors looks at the proportion of men and women who occupy a place in the board. Globally men occupy more seats than women. This is being adressed by governments all over the world, trying to get an equilibrium between men and women in the board.  

In 2011 the quota for women in the board was implemented in the Belgium law. By 2017, at least one third of the board of directors of stock quoted companies should be women. The European Comission even raised these quota and by 2020 40 % of the board of directors of European publicly listed companies should be women. It is not a rigid quantitative quota obligation but a procedural quota. This in order to break the glass ceiling and have a better gender balance in the board. 

Looking at the graph below, comparing the percentages of female directors in the board of S &P 500 company boards by industry, we see a clear rise in all industries between 2010 and 2014. But it is obvious that the numbers are still far from the 40 % that the European Commission wants.

Some critiques wonder why it is necessary to implement quotas and if the companies will benefit from this. “Is it needed that we oblige companies to have more women in their boards?” Various research papers prove that the quota on female directors raise the quality of the board and their decisions, as well as the performance of the companies in a whole.

A recent report by Catalyst points out that the Fortune 500 companies with the highest representation of women on the board of directors attained significantly higher performance than those with the lowest representation of women. This proves that gender diversification at the board of directors has some positive effects. The study looks at three critical financial measures: return on equity, return on sales and return of invested capital. They compared those ratios for companies with the highest level of women on the board and companies with the lowest representation. 

This figure shows the result of their research. For all three ratios, companies with more women board directors (WBD) outperform the companies with the lowest representation of women. The return on equity is 53 % higher for companies with more women on the board. Looking at the return on sales, the companies with a higher diversification outperform with 42 %, and by 66 % for the return on invested capital. The correlation between company performance and gender diversification can also be seen across industries. 

Possible explanations of better performance of companies with more diversification on the board is that women are less ‘risk-takers’ and that they provide a better flow of information. Women will be more careful for reputational damage and they improve the corporate governance structure of companies overall. 

Fortune 500 Female CEO's

This might come as a shock to you -or it might not- , but of the Fortune 500 companies, there are 24 companies that had a female CEO in 2014. This means that only 4,8% of these 500 American companies have a woman as CEO. This is fairly little, yes. But let us look at the history behind it.

In 1998 only one company on the famous list had a female CEO, as times moved on and people's rationale became more open towards women in the businessworld, this amount slightly rose. In 2014, there were 24 companies that had a female CEO, which is a significant upward rise in only 16 years time.

 While the fact that the amount of female Fortune 500 CEO's is uprising is good news, we must keep in mind that this small percentage is still in shrill contrast with the amount of female employees in these companies. Women make up almost half of the work force (45%) in these 500 companies, while only a small amount of them is able to make their way to the top. Following pyramid graph makes this division of women in the organizational structure more clear. It is very clear that the higher we are on the organizational ladder, the fewer women are present.






How can it be that in a world full of powerful women like Angela Merkel, Christine Lagarde, Oprah Winfrey and so much others, there can still be a certain stigma concerning leadership by women?

Could it maybe be that people still expect women to be the number one caretaker for the kids? Let's face it, when a child is sick at school, the teacher is most likely to call the mother instead of the father. Women are associated with natural caregivers, which they are by nature. But this should not stand in their way of being ambitious and pursuing a busy career.

Or is it maybe because women are inherently more emotional than men, and men can be more 'cold' when necessary on the work floor? Here, I think it is important to take into account two important notes. First, as the years go by, we see that women and men do not act like the way they have been stereotyped for ages. Some women are not afraid to show their though side, just like more and more men are applauded for showing their more 'soft' side. Secondly, there is no 'one way' to be a good leader. While some leaders might gain respect with some employees by being a cold-blooded workhorse not taking others into account, other leaders might be praised for their empathic leadership-style. These are extreme cases of course, just to show that there is no one perfect leadership style.