Fixing gender disparities in the upper ranks
by Cindy SchipaniMs.Schipani is the Merwin H. Waterman Collegiate Professor of Business Administration and professor of business law at the university of Michigan’s Ross School of Business. Reprinted with permission.
U.S. business suffers from a gender paradox. Studies show companies with gender parity on boards and in the executive ranks outperform male-dominated ones. Yet, women represent only 9 percent of top management positions and 5.2 percent of CEOs of Fortune 500 companies.
Michigan Ross Professor Cindy Schipani and colleague Terry Dworkin of Indiana University and Seattle University say companies can improve gender representation and narrow the pay gap by changing salary and mentoring practices. They also suggest a legal tweak that would encourage companies to promote women.
Performance & Diversity
“This gender paradox is continually puzzling to me because the evidence is overwhelming that companies with women in the C-Suite perform better,” says Schipani, Merwin H. Waterman Collegiate Professor of Business Administration and professor of business law. “Companies tend to perform better when there is diversity in approaches to decision-making — it just doesn’t make sense to exclude representation of half the population from the upper ranks. The business case is well established, but we’re not seeing it happen.”
Their working paper is titled “The Need for Mentoring and Legal Reform to Resolve the Gender Paradox in Business.”
The legal reform they suggest is for courts to consider the lack of women in leadership positions a presumption of discrimination. That is, in a gender discrimination case against a company with few or no women leaders, the burden would shift to the company to prove that it doesn’t engage in gender bias.
“We hope that the more the lack of women in leadership is exposed in legal cases and companies are forced to justify them in court, companies will have an even stronger incentive to address the issue and address it fast,” Schipani says.
What’s harder to get at is the subtle discrimination, and that’s where company practices can help. The lack of female leadership is not a supply problem. Women are more likely to have an advanced degree than men, and enter the workforce in equal numbers. Women also attend graduate school at a higher proportion than men.
One thing that prevents women from moving up the ladder is the pay gap. Schipani points out that a recent poll by the Wall Street Journal found many elite professions showed the biggest gender pay gaps and “motherhood wage penalties.”
Schipani and Dworkin suggest salary transparency is a way to combat the gap. Studies show that companies where salaries are made known publicly reduce wage differences between men and women. Employees are better informed for wage bargaining and simply making wages known can change salary practices.
Google has famously ignored past salaries to avoid reproducing any possible past disadvantages. The company instead sets the salary to what it considers the job to be worth.
Fix the Pay Gap?
“Yes, this can be improved with legislation, but companies can fix the pay gap themselves by paying attention to it,” she says. “You manage to what you measure.”
Mentoring is the other practice companies need to improve to move women higher in the executive ranks. Schipani says there’s not enough mentoring in middle management and mentors need training to be effective.
“If the relationship is one in which the mentor doesn’t have any power, then that’s not going to help the mentee or the company,” she says. “Random pairings don’t cut it.”
Too many companies don’t pay attention to whom they pair up, Schipani says. And what women really need is sponsorship — mentors who won’t just guide, but also tell other people about the person’s value and suggest them to work on important projects.
“It’s hard to force this, but it should happen more because it works,” Schipani says.
This isn’t to say there hasn’t been progress. The late 1900s saw growth of women in both the workplace and in management. But upward progress has stalled and it’s time businesses take action on their own, she says.
“Overt bias is frowned upon and against the law. But most decision-makers are still men and there’s a psychological tendency to select the familiar,” Schipani says. “The problem is subtle and ingrained. The good news is that when most people are made aware of it they want to change it.” ◊