A New Role for Women in the Workforce

It seems that women are all the rage right now. As women like Hillary Clinton, Sarah Palin and Elena Kagan continue to dominate the political scene, a Bloomberg News report released the staggering statistics that the top female CEOs are earning more than their male counterparts. While this may come as a surprise to many, UC Irvine business professors confirm that women are thriving in the business world.

In the Bloomberg article, Sheila Wellington, who studies women business leaders, believes that simple Darwinian competition could explain why women are paid more when they rise to the top of the organizational hierarchy.

The women who actually succeed in climbing up the ladder have already proven that they are skilled negotiators and represent the strongest, fittest and toughest of the pack. They have what it takes to lead; all they needed was a chance.

“Women are doing much better,” said UCI business professor Emerita Judy Rosener. “But this is good news and bad. Women are getting more opportunities to own and lead small- and medium-sized companies, where they are shown to employ more workers than the Fortune 500 combined. They are, in many senses, the economic engine of our economy. However, in larger firms, there still exists a hierarchy dominated by men, where it is thought that to be a leader is to be a male.”

The report of women CEOs can be misleading, Rosener cautioned. Since there are so few women as chief executives, every woman who gets named as one instantly becomes news. This exaggerates the improvement associated towards gender discrimination by downplaying the female-male gap.

When Fortune 500 compiled a list of the world’s top-performing companies in 2009, they attributed only 13 (2.6 percent) to be women.

In a Harvard Business Review study, professors Herminia Ibarra and Morten Hansen created a similar ranking by studying the leadership of 2,000 of the best businesses. They found that just 29 (1.5 percent) of those CEOs were women.

Furthermore, of these 29 women, 19 were appointed as the head honchos of their respective companies on or after 2002. It may be that women simply have had less time to build their legacies.

“The battle is not won by a long shot. Yes, women are doing better now, but that’s because they were getting so much less before!” Rosener said.

One notable difference between male and female CEOs is that females still are not treated as equals to men when it comes to high stakes positions.

Women CEOs are more likely than men to be appointed to the job from outside of the company, despite the fact that countless analyses clearly show that inside-CEO candidates perform better, presumably because long-term growth depends on deep industry and firm specific knowledge. Inside-CEOs refer to those that follow the normal pattern of moving their way up within a company, from receptionist to manager and then to executive positions.

Yet, for women, the exact opposite seems to occur. Women are less likely to emerge as winners in their own companies’ internal CEO tournament. It appears that businesses will still appoint men from their companies first before looking outside to acquire women.

However, it may be this very fact that has increased the salaries of the few women who have joined the ranks of senior executives.

There is a growing market for female leaders and, at least for now, there is not a huge supply of women capable of becoming successful CEOs, which is reflected in their salaries.

The Bloomberg report showed that women CEOs got a 19 percent raise last year, while men took a five percent salary cut. And as more and more companies begin to hire female CEOs to head their firms, many others are catching on, shedding the stereotypical housewife image.

“The world is diverse and fast-changing. People nowadays need to be comfortable with this kind of ambiguity and interaction if they want to be successful in business,” Rosener said. “Women are just that, which is why they are slowly becoming more valuable.”

Another explanation for the low number of women senior executives is that women are expected to be concentrated more in consumer goods and media.

In general, women are more interested in the product or service they are selling. Men have been shown to be more caught up in the money. It is no surprise that there are more women employees and CEOs in health, education and social service industries than in engineering and IT.

Yet even if those few women do make it to the top spot, they face additional market and media scrutiny than men. The Harvard Review cites the results of a study by Erica James, which found that a company’s stock drops after the announcement of a female CEO, but not after that of a male CEO. This effect was even stronger for “outsider” CEO women.

Finally, women leaders also face the issue of their appearance and looks. This “visibility,” as James calls it, can help a male chief executive get attention on his leadership. In other words, James said, “When men talk strategy, it is fair to say that nobody is thinking too much about the black suit he is wearing.”

“Of course,” Rosener said, “We need both male and female leaders in our society. One gender is not better or worse than the other; they’re just different, and the world needs a collaboration of both.”

Looking at the statistics, there is a consistent trend that the percentage of women who are a part of a prestigious B-School is already significantly lower than that of men.

At the University of Pennsylvania’s Wharton School of Business, women make up 40 percent of the Class of 2011. Similarly, only 36 percent of the incoming class at Harvard Business School are women. Finally, at Paul Merage School of Business here at UCI, 36 percent of the new students are women. With these lower numbers, it is no surprise that there are few women qualified to be named as a CEO of a firm.

If one does want to pursue a career as a chief executive, men and women alike have an added benefit if they receive their undergraduate degrees at a University of California site.

The current copy of Bloomberg Businessweek made a list of chief executives’ undergraduate alma maters, showing which schools produced the most corporate chieftains among S&P companies. The number one spot goes to the UC schools, with 12 CEOs hailing from any one of the ten campuses. Harvard is at a close third and Wharton does not even make the top ten on the list.

M.B.A. students at UCI may fare even better. The Paul Merage School of Business has consistently ranked among the top 10 percent of all AACSB-accredited programs. Additionally, the employment of MBA students within three months of graduation is ranked number one in the entire U.S. with nearly 90 percent of its graduates finding a job.

“One tremendous difference I noticed at UCI is that it is much more diverse in its student body, which is definitely a function of the location of the schools,” Merage professor Grace McLaughlin said. “There is a depth and breadth of opinions, insights and attitudes that brings a deeper understanding of situations, which allows for a more broad range of discussion. ”

Increasing numbers of women are proving that they can be successful and they each have the opportunity to become some of the most highly paid and respected CEOs.