Will female business leaders ever achieve equal outcomes with men? It seems women are further from equality than ever. The June 2016 Fortune 500 list includes just 21 companies with women at the helm, meaning women make up only 4.2% of CEO positions in America’s 500 largest companies. 25% of Russell 30000 companies have all-male boards, and nearly 60% have boards comprised of fewer than 15% female directors.
On the surface these statistics seem to be proof of a larger societal problem. The small percentage of female leaders suggests women are being unfairly shut out of the highest levels of business management. Could this be evidence of the ongoing victimization of American women by an oppressive patriarchy?
Equal Outcomes versus Equal Opportunity
Lack of gender equality in business leadership can be addressed by two competing societal ideologies: equality of opportunity and equality of outcomes.
Equality of opportunity is the belief that a just society must provide individuals with an equal chance of accessing opportunities to achieve their goals and improve their lives. Career opportunities are made available through open and fair competition based on personal merit; consideration based on unrelated traits such as gender, ethnicity, race, disability, age, or sexual orientation is not permitted. Individual candidates compete for jobs, roles, and promotions within a company based on their education, experience, competencies, and skill sets.
Equality of outcome is the belief that a just society must ensure equal results by removing barriers preventing marginalized groups from achieving their goals and improving their lives. Individuals do not compete for jobs, roles, and promotions based solely on experience, core competencies, or skill sets; positions are at least partially allocated for unrelated traits like gender, ethnicity, race, religion, disability, age, or sexual orientation. Companies that focus on equality of outcome strive to reduce or eliminate inequalities by re-allocating positions from members of groups that have traditionally held them, to members of groups perceived by society as marginalized.
The Drawbacks of Focusing Solely on Results
When society focuses on equal outcomes as the sole indicator of a company’s success in achieving gender diversity, American businesses are unfairly perceived as engaging in sexism and discriminating against their female employees. Companies making genuine and substantive efforts to ensure equal opportunity for women leaders are dismissed outright. Programs that have demonstrated resounding success in recruiting, retaining, and promoting female leaders are ignored. Best practices in helping women advance to higher levels of management are not shared between companies and industries. And ultimately, a focus on equal outcomes refuses to see women as individual, autonomous free agents making the life and career choices that work best for them.
Case Study – State Street Global Advisors
Recently the financial firm State Street Global Advisors created a stir by installing their Fearless Girl statue across from Wall Street’s iconic charging bull. The firm says Fearless was commissioned as a symbol of the empowered female presence on Wall Street and in the world of business. Since the installation, however, many have argued that State Street’s own record on hiring women indicates they need a dose of their own medicine.
In the wake of Fearless, Town and Country magazine headlined, “The Wall Street Firm that Commissioned the Fearless Girl Statue has Only 3 Women on its Board” of 11 members (that’s 27%). State Street spokesperson Anne McNally confirmed that top management positions at State Street are similarly unequal – 23% of the firm’s executive vice presidents and 28% of their senior vice presidents are female. Overall, women make up only one in five employees within the company’s investment unit.
On the surface, it appears that State Street isn’t even close to achieving equal gender outcomes in their own company. Can a firm with these stats credibly speak to American business about female empowerment and gender diversity?
Perception versus Reality
Further research shows State Street has proven itself dedicated to promoting female leadership in C-Suites in the finance industry and across all fields of business. State Street’s gender diversity in leadership statistics significantly exceed those of the financial industry in general. For context, financial services is a field wherein women make up 54.2% of the labor force, but comprise only 12.4% of executive officers, and 18.3% of board members. State Street has committed itself to studying and acting upon the issues related to attracting, retaining, and promoting female employees, resulting in their higher-than-industry-average numbers of women in upper management.
The firm’s commitment to gender equity is demonstrated by nearly two decades of active recruiting and leadership development policies. Ongoing initiatives including aggressive outreach to college-age women; intensive female mentorship programs; soliciting and acting on feedback from internal women’s advisory boards; offering on the job training; providing financial aid and tutoring for Certified Financial Planner certification (critical for industry success). The firm is exercising greater flexibility in hiring high-potential but less experienced female professionals who haven’t yet had the opportunity to rack up successes in the financial industry. Finally, they publish their research and success stories (one example here) to share best practices with a wider audience.
Talk and Action
All these internal programs are talking the talk, but State Street proves they are also walking the walk. The firm doesn’t trade in individual stocks, it manages exchange traded funds (EFTs) – comingled investment vehicles containing a “basket” of individual securities. In March, State Street announced they would use their proxy voting power to enact greater gender diversity within the ranks of the business partners included in that basket.
The firm will “drive greater board diversity through active dialogue and engagement with companies and board leadership. In the event that companies fail to take action to increase the number of women on their boards, despite our best efforts to actively engage with them, we will use our proxy voting power to effect change – voting against the Chair of the boards nominating and/or governance committee if necessary.”
Not bad for a company with such dismal outcomes on gender equity.
Seeing the emphasis State Street places on driving women’s leadership, you might believe State Street is the most altruistic company in the world – committed to enhancing the lives of women in the name of diversity alone. But companies like State Street know that advancing the interests of women employees is the best way to advance their own bottom line.
Women Leaders Wanted
Finance firms know their client demographics well – and increasingly, their clients are female. Longer-lived women are expected to control two-thirds of the nation’s wealth by 2030. Nine out of 10 women will at some point in their lives be the sole financial decision maker in their household. Fully 70% of married female investors leave their financial advisor within one year of being widowed.
State Street’s own research shows that 55% of women between the ages of 25 and 34 prefer working with a female advisor. Financial companies have a huge bottom-line incentive for giving women customers what they want – and they want investment advice from other women.
Unfortunately, the supply of female investment advisors is nowhere near able to meet the demand. According to the Bureau of Labor Statistics, only 35.5% of personal financial advisors are female. Recent data from Cerulli Associates states that women make up just 14% of all advisors and brokers. The percentage of female Certified Financial Planners, a critical degree for success in the industry, has remained flat at 23% for over a decade. Data on workforce gender in finance varies, but all research agrees the industry remains overwhelmingly dominated by men.
Beyond the financial industry, research confirms the importance of gender-diverse leadership across all U.S. industries: companies with a higher proportion of women in their executive committees demonstrate better financial performance – 41% better return on equity and 56% better in terms of overall earnings.
Patriarchy or Personal Choice?
State Street understands that improving their bottom line depends on attracting and retaining female leadership. They are committed to using an equal opportunity model to achieve that goal. Their historical efforts have yielded notable if limited success in attracting women to the finance industry and increasing the number of women on their borard and in leadership positions.
Their latest effort to utilize their proxy vote to encourage greater numbers of women board members across hundreds of business and industries has the potential to promote greater boardroom gender diversity on a larger scale.
And yet after over 20 years of concerted effort, State Street leads the finance industry with just three women on an 11-member board of directors. Despite all their outreach and efforts, perhaps sexism is still at play.
Freedom to Choose
Firms determined to hire more female leaders are up against one of the strongest and most implacable forces in the history of humanity – not the patriarchy, but the autonomy, free agency, and self-determination enjoyed by modern American women.
Gallup recently released its State of the American Workplace Report 2017. A critical finding states female employees are “significantly more likely than male employees (60% versus 48%, respectively) to say it is very important to them that their job allows greater work-life balance and better personal well-being.”
The desire for work/family flexibility has intensified in the 2010s, but reconfirms learnings from previous studies. Every decade, Gallup questions women about their career aspirations. Pooling the results from the 1980s to present, we consistently find that approximately 20% of adult women say they want a high-powered career, 20% want to be homemakers, and 60% want a job with flexible time demands that allows for greater work and family balance.
Often child care is seen as the driving factor behind the desire for job flexibility, but 2104 data from the U.S. Bureau of Labor Statistics shows that women across the board, regardless of marital or motherhood status, and adjusting to control for full time versus part time roles, work on average 7.8 hours per day compared to the 8.4 hour daily average worked by their male counterparts. It appears that childless women take advantage of flextime as often as working mothers do.
Women, be they married or single, with or without children, consistently demonstrate they are willing to sacrifice the higher paycheck and greater influence of a position in upper management in favor of a lower-level position that allows shorter hours and greater flexibility in work schedule.
Becoming a CEO, or a partner in a law firm, or a top financial advisor generally requires decades of extensive, uninterrupted middle-management experience. The “uninterrupted” aspect is particularly difficult for females to achieve, with 37% of women choosing pause their careers for two or three years, most often for child or elder care.
Companies that offer benefits women value, such as part-time work, telecommuting, family leave, off-and-on-ramping options, and customized work schedules consistently attract and retain greater numbers of female leaders to their workforces. However, job requirements in most upper leadership positions often don’t allow for this type of flexibility.
Making it to the top requires working long hours and being on call day or night to meet the needs of the business. Business leaders in upper management are expected to put their jobs first in return for the prestige and salary of their leadership position. This expectation generally does not fit with the work and family flexibility required by the vast majority of women in the workplace.
Here we see the true root of the male/female imbalance, and the real reason we aren’t even close to equal outcomes in gender diversity at the highest levels of management regardless of industry. Most high-level leadership positions simply don’t offer the job flexibility women need to feel fulfilled, which means women are choosing other positions or careers that do provide that flexibility.
Different Choices, Different Results, Similar Fulfillment
While certain leadership positions will never offer the flexibility demanded by the majority of working women, recruiting females into entry-level and middle-management jobs and supporting them with leadership development initiatives (and as much time flexibility as possible) should ultimately create a pipeline of promotion-ready women. This in turn will lead to greater numbers of women in leadership roles and eventually improved gender equity in upper management. This is the goal being pursued by State Street with their gold-standard efforts to recruit, support, and retain female leaders.
Even if all American companies embrace the changes required to encourage female leaders, however, it’s unrealistic to expect a 50/50 split between male and female CEOs, law firm partners, or financial analysts. Women’s freedom of choice in pursuing personal fulfillment works against numerical equality.
Disparate outcomes do not necessarily imply disparate opportunities or disparate treatment. In the working world, unequal outcomes in gender are not caused by discrimination, oppression, sexism, or the patriarchy. Rather, they are the result of the deliberate choices made by men and women in selecting the career path that works best for them.
It’s long past time for America to shed the simplistic and unrealistic expectations of equal outcomes in favor of ensuring equal opportunity. Success for women and for employers is reached when companies do all they can to recruit, retain, promote, and reward women leaders – not when numerical gender equality is achieved.