Women CEOs and the hard path to the board

Source: Financial Times, published on 07 August 2018

Indra Nooyi’s 12-year tenure as chief executive of PepsiCo highlights the strides women have made in getting to the top levels of business leadership. Yet, for all the achievements of Ms Nooyi, born in Chennai, India, in smashing America’s glass ceiling, the number of female CEOs of big US companies has fallen in the past year.

Ms Nooyi’s departure from PepsiCo in October will reduce from 24 to 23 the women heading Fortune 500 companies, though Kathy Warden is due to become CEO of Northrop Grumman in January. Little over a year ago, the total was 32. A third of those have since resigned; several — including Campbell Soup’s Denise Morrison, Irene Rosenfeld at Mondelez and Hewlett-Packard’s Meg Whitman — have been succeeded, like Ms Nooyi, by men.

Women are becoming more common and visible in chief executive roles. But surveys show corporate employees — especially men — tend to overestimate women’s representation in the top echelons. The danger is that women’s presence in C-suite jobs starts to stall at its current, highly inadequate, level.

For now, the trend remains broadly in the right direction. Challenger, Gray & Christmas, an outsourcing company, found 18 per cent of all new US CEOs appointed last year were women — up from 15 per cent in 2015. In the legal industry, half of new CEOs were female. But among CEOs of London-listed FTSE 100 companies, a survey in March found there were more called David (9) than there were women (8).

One issue is still the composition of boards, which tend to appoint C-suite members in their own image. Progress has been made, with women making up 21 per cent of S&P 500 board directors, according to Catalyst, a non-profit group. Perhaps thanks to the nine-year term limits on directorships in the UK — leading to greater rotation — and more active campaigns by government and business lobbies, the proportion is higher among FTSE 100 companies, at about 28 per cent.

A bigger problem is the pipeline of women available for promotion. Ms Nooyi herself suggested in an interview this year that there were lots of women in entry-level corporate positions, but candidates for top jobs thinned out after women had to grapple with balancing children, marriage, and careers.

A McKinsey study in 2017 found women and men in fact tend to leave organisations at about the same rate, with few women planning to leave the workforce to focus on family. But it found female employees were under-represented, and under-promoted, at every level in corporate America, including among entry-level hires — despite more women earning college degrees than men for the past 30 years.

Senior women tend to be better represented, meanwhile, in positions such as legal, human resources and finance, than in operational management jobs that lead more often to CEO positions.

The task of getting more women into leadership roles must therefore begin at recruitment — and before. Companies need to work harder to attract and hire talented female employees. Businesses, and governments, should do more to support workers with families by providing affordable childcare, crèches, and flexible, paid parental leave. Efforts should be accelerated to increase boardroom diversity.

This is a moral issue. But it also makes good business and economic sense. Multiple studies have shown companies with more women in decision-making roles, and throughout the workforce, achieve better financial results and have fewer governance and reputational problems. Companies that fall short on gender equality may find investors start to penalise them.

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