Why Companies with Female CEOs Don't Hire More Women Leaders

Perhaps counterintuitively, companies with female CEOs don't have better diversity numbers than those led by men, law firm Fenwick & West LLP said today in a report on gender diversity.

 

"Having a woman on the board or serving as CEO does not translate into more women in other board or leadership positions," the report said.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

From the report: This graph shows the "percentage of companies during the 2014 proxy season with and without at least woman serving on the board..." (FENWICK & WEST LLP)

 

Although 62% of companies in the San Jose Mercury News' Silicon Valley 150 Index of the top public companies have at least one woman as a director, only 20% of those have more than one, the report said.

 

In the Standard & Poor's 100 stock market index, the report found there are more women directors in executive roles, but a proportional lack of gender diversity is maintained because most of those companies have larger boards. For example, of the 27 S&P 100 companies that have 12-member boards of directors, only three companies' boards have as many as four or five women in them. And 19 of those 27 boards only include two or three women each.

 

The report compared the S&P 100's index to the Silicon Valley 150 index because it said gender can be more accurately measured in public filings than other "traditional diversity factors" and because "women should be a representative group, as they make up almost half of the workforce and hold slightly more than half of the management, professional and related positions in the U.S."

 

The goal of the report is to be used as an objective resource for Silicon Valley companies to determine how women are doing at the senior levels of IT management.

 

The Silicon Valley 150 ranks the top public companies in the Valley based on worldwide revenue for the last four quarters between proxy seasons, while the S&P 100 ranks the leading U.S. stocks that trade options on a regulated exchange rate.

The latter list includes Silicon Valley powerhouses like Apple, Inc. and Cisco Systems.

 

Nine of the companies in the S&P 100 also appear in the SV 150.

 

Other key statistics from the report show there are twice as many women directors in the S&P 100 index as there are in the SV 150, but that women in executive officer positions are more likely to be Named Executive Officers(NEOs) in the SV 150 than in the S&P 100.

 

The current definition of an NEO is of a top-five executive officer in a company that receives the highest financial compensation.

 

In a phone interview before the report was published, lead investigator and Fenwick lawyer David A. Bell acknowledged the report's stats don't answer the question of why there is no meaningful difference in the effect of gender diversity with men or women as CEO.

 

But he said it is the accepted, anecdotal belief of most women leaders he has spoken to that members of both genders think about executive positions in the same way: objectively, with the company's interest solely in mind.

 

Most women and men in executive roles, he said, "don't want to be seen as making decisions based on gender." Women want to surround themselves with capable, skilled officers who can help them best run the company, just like men do.

Bell said the survey results reveal a stark truth that is tough for some people to take.

 

"There is no magic flywheel effort that will make more women get [to the top leadership positions]," he said.

But Bell said he hopes companies that want to improve their gender diversity on the executive ranks will continue to come up with strategies to make it happen and follow through with them.

 

The annual Gender Diversity Index report analyzes gender leadership issues between 1996 and 2014. This is only the second year the survey has been built out as a separate report. Previously, it was part of the annual Corporate Governance Practices report, which was also released today.

 

The Corporate Governance Practices survey also looks into companies in the S&P 100 and SV 150 indices. That survey's analysis focuses on trends in "management, leadership, and governance."

 

The diversity index found the board size is only one of a number of reasons why so few women are directors.

Another factor is that women are severely underrepresented in the venture capital business.

 

Bell said Silicon Valley companies have a lot to do to improve their gender diversity.

 

He said IT companies should take a long-term view of the problem. For example, he noted more women than ever are now working toward more technical and graduate degrees, which will help them prepare for high-level IT roles later in their careers.

 

The report also said companies need to be proactive in their recruitment efforts.

 

When executive boards are recruiting for new members, for instance, they often keep the search limited to their own small social and career network pools, which are inevitably filled with more men. Many companies, the report said, narrow their executive choices by refusing to pay the expensive fees to hire a search firm to look for more diverse candidates. Even though it might be expensive, the investment could be repaid with a board filled with more diverse opinions.

 

 

 

 

This article was originally published in The Silicon Valley Business Journal.

 

 

 

 

 

© 2016 by JOSE FERMOSO 

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